Airlines not expected to get boost from business travel

By Brad Foss
Associated Press

Ellen Hanzl, assistant vice president for corporate travel at Computer Associates, says the full impact of cost-containment in business travel has yet to be felt. Associated Press

Telephone service provider Bellsouth Corp. also plans to limit travel expenses, staffing five full-time travel agents compared with 50 just three years ago, and holding videoconferences whenever possible.

At Lockheed Martin Corp., travel transaction costs are expected to decline by $4 million this year as nearly two-thirds of the defense contractor's employees embrace the company's Internet-based booking system.

Large U.S. companies have no plans to expand their shrunken travel budgets in coming months.

For the struggling airline industry, which needs corporate travelers to open up their wallets again to fully recovery from its worst downturn ever, this is not good news.

J.P. Morgan airline analyst Jamie Baker said in a report published yesterday that "a rapid rebound in business demand ... is unlikely to materialize."

Corporate travel managers say money-saving initiatives launched when the economy soured a few years ago are here to stay. They say employees gradually are getting hooked, with a little prodding from management, on new technologies for booking and communications. In addition, the expanding networks of low-fare airlines has made it more convenient for business travelers.

These changes are bound to curb the pace of the airline industry's nascent recovery. Still, airline executives and some analysts are optimistic that the industry can build on its relative success this summer, when domestic flights were packed with leisure travelers, albeit at historically low fare levels.

Many analysts have narrowed their industrywide loss estimates for the third quarter. And while losses for the year could top $6 billion, airline stocks have risen sharply from historic lows a few months ago. Analysts expect third-quarter net profits from at least two major carriers: Continental and, as always, Southwest.

For most major carriers, it is the impact of aggressive cost-cutting, not a huge revenue rebound, that is responsible for gradually improving bottom lines, analysts said.

Cutting costs called key

United Airlines and US Airways wrung billions of dollars in concessions from employees in bankruptcy court, while American Airlines did the same to avert Chapter 11.

"Cost containment is No. 1," said John Heimlich, chief economist at the Air Transport Association, a Washington-based trade group.

Another reason for airlines to be cautious is that the multibillion-dollar federal program to reimburse airlines for security fees expires at the end of September.

The reimbursements were worth about $7 for every round-trip ticket sold.

The end of the federal aid program comes at a time of year when the industry would traditionally get a boost from business travelers. But that is unlikely.

"There doesn't seem to be any move to expand (corporate) travel budgets," said Kevin Mitchell, chairman of the Business Travel Coalition of Radnor, Pa.

PerkinElmer Inc. plans to spend a little more than $30 million on travel and entertainment in 2003, down 40 percent from 2000, said Tom McCabe, director of global travel services for the Wellesley, Mass., maker of laboratory equipment.

The company has trimmed its travel budget each of the past three years, and McCabe said there is no sign of reversing course.

PerkinElmer is sending one employee instead of two or three when face-to-face meetings are absolutely necessary.

As for the increased reliance on video- and Web-conferencing, McCabe said employees don't grumble about the technology's shortcomings as much as they used to.

"They're looking at it for what it is, an alternative to spending thousands of dollars," he said.

Lockheed Martin will spend nearly $340 million on plane tickets, hotel rooms and rental cars in 2003, down 15 percent from 2001, said Richard Wooten, director of corporate travel services.

The cost reductions are the result of better planning, not fewer trips, said Wooten, who anticipates further savings as more employees begin using the company's online booking system, GetThere. Lockheed Martin employees who use the system, a product of Sabre Inc., spend 11 percent less per ticket on average than employees who call a travel agent.

Nationwide, business fares are down 5 percent from a year ago, according to Harrell Associates, a New York-based firm that tracks ticket prices. And, according to J.P. Morgan's Baker, low-fare carriers will control one-fifth of all domestic revenue by the end of the year.

At Computer Associates, where more than 60 percent of employees use GetThere, spending is expected to be $40 million in 2003, compared with $50 million in 2000. The Islandia, N.Y.-based company expects 80 percent of its workers to eventually use the system.

Computer Associates is also trimming its travel budget by holding regional, as opposed to national, training sessions for its sales force, and its online booking system automatically detects if an employee's itinerary exceeds the suggested per diem costs for a particular city.

Saving not 'a fad'

Ellen Hanzl, Computer Associates' assistant vice president of corporate travel, said the full impact of the corporate travel revolution has yet to be felt.

"This is the wave of the future. I don't think it's a fad at all," Hanzl said. "The (cost-saving) tools are only going to get better."