Posted on: Monday, October 7, 2002

Fliers suffer from airlines' cost-cutting

By Brad Foss
Associated Press

NEW YORK — Finished with a weeklong business trip earlier than expected, Brent Baer approached the US Airways ticket agent with a smile, eager to catch the 2 p.m. flight to Washington and get home before dark.

But Baer walked away with a dilemma that caused him to grimace: either pay $246 to change the itinerary on a roundtrip ticket that originally cost $98, or save his money and wait 5 1/2 hours for the flight he had originally booked. ith airlines expected to lose nearly $8 billion for the second year in a row, the industry has become less generous with customers such as Baer who want to fly on the cheap. By linking hefty fees with tight restrictions, the struggling airlines hope to generate tens of millions of dollars per year in extra revenue.

In short, penny-pinching passengers may have finally met their match: penniless carriers.

"The industry is losing its shirt, is flat on its back and is looking for every dollar of revenue that it can find," said David Swierenga, chief economist at the Washington-based Air Transport Association, an industry group.

Carriers have increased fees for paper tickets and extra baggage, taken away senior discounts and increased the cost of travel for children flying unaccompanied by an adult. Hot meals are gone on many domestic flights and alcoholic drinks no longer come free on international ones.

The airlines have gotten particularly tough with corporate customers, refusing to let them use discounts negotiated by their employer when they purchase cheaper fares aimed at leisure travelers. The cheapest leisure fares are about one-sixth the price of typical business fares.

"The problem for us is that only about one in a dozen passengers is flying at full coach fares," Don Carty, chief executive of American Airlines, told Wall Street analysts recently. That's significant, Carty said, because nearly half of American's sales come from traditionally higher-paying business travelers.

The latest change by American, US Airways and others — the one that wiped the grin off Baer's face at La Guardia Airport in New York — was to put heavy restrictions on nonrefundable tickets, making these inexpensive fares less attractive to travelers who require more flexibility.

Air travelers began to curtail spending roughly 18 months ago because of the economic downturn. The trend was accelerated by last year's terrorist attacks and, subsequently, the industry relied on dramatic price cuts to lure people back to the skies. The average domestic fare in August was at a 14-year low, Swierenga said.

The rising popularity of Internet-based travel agents such as Expedia, Orbitz and Travelocity, and the increased market share of low-fare carriers such as AirTran, JetBlue and Southwest, provide further evidence of traveler frugality.

To survive, major carriers undertook a wide range of cost-cutting measures. Employees were laid off. Planes were grounded. Schedules were shrunk. And travel agents' commissions, which had been reduced, were eliminated. But those changes had little impact on the travel experience.

By contrast, the stricter rules, new fees and scaled-back services may aggravate travelers, analysts said.

"I don't think of the airlines as the bad guys as much as I do the dumb guys," said Ed Perkins, an advocate for fliers who founded the Consumer Reports Travel Letter. Perkins believes the nickel-and-diming of passengers might not really be worth it for an industry that desperately needs to stimulate demand.

"It reminds me of a corporation that's losing zillions of dollars and decides to fight back by controlling the way employees use paper clips and Scotch tape," he said.

Under the new rules affecting nonrefundable tickets, customers on most major airlines will have to pay a fee to fly standby and those who miss their flights will have to buy new tickets.

Baer, who works for a Charlottesville, Va.-based advertising agency, was unfamiliar with the new rules and was stunned to find out that catching the earlier flight would more than triple his cost. So he called the US Airways reservations department to "moan a little bit" and the carrier eventually allowed him to board the 2 p.m. flight for a reduced fee of $100.

But that still doubled Baer's air travel expense. In the future, he said, "the question becomes do I buy the refundable fare?"