Business fares lose their luster
By SHEILA J. KITTLE
In a year of stunning financial losses for the top U.S. airlines, the carriers obviously decided that the flying public wouldn't be too concerned if they changed a few rules and added charges to the cost of air travel. The airlines were wrong.
Most travelers -- business or leisure -- believe they are being "nickeled and dimed" in order to help an industry whose economic woes started long before Sept. 11, 2001.
Now, the decline in airline revenue has nothing to do with passengers' fear of flying. It is the fear of purchasing a ticket that has absolutely no value if the trip is canceled -- the infamous "use it or lose it" rule instituted in late August by most of the major carriers.
Even if that type of ticket is purchased and the trip is taken, and beyond the airport security "hassle factor," the traveler must now contend with other potential charges: for excess baggage, oversized baggage, change fees, standby fees, just to name a few.
If the airlines truly realized how the average business traveler has changed over the past few years, then perhaps they would understand why these new fees are viewed as unacceptable.
Many carriers have gone on record stating that the "use it or lose it" rule is designed to deter business travelers from purchasing less costly but more restrictive nonrefundable fares. Because the airlines know that a business traveler's plans are subject to change and cancellation far more often than are the plans of a leisure traveler, the carriers had assumed the business traveler "needs" to purchase a fare that accommodates possible changes.
That may have been a valid argument when nonrefundable fares required a Saturday night stay at the destination, had to be purchased from one to three weeks in advance, and were not available for flying during peak travel times.
But the nonrefundable fares offered today mirror the same booking criteria as many of the refundable fares, so why would any traveler pay more for the same ticket?
What's a business traveler to do?
Most likely, whatever his or her corporate travel policy instructs. The problem is, many travel managers don't know the answer, either.
Should a corporation pay for a refundable fare that can cost as much as six times the nonrefundable fare, for the luxury of being able to make a change without paying a penalty?
To determine whether a refundable or nonrefundable ticket is the best option requires excellent planning and a bit of math skill:
If the difference between the two ticket types is a couple of hundred dollars, it is probably wise to opt for the refundable ticket, in case a change or cancellation is necessary.
But for a greater fare differential, the traveler or travel manager must weigh the risks of eating the ticket cost if the travel on a nonrefundable ticket has to be canceled.
A viable option
For those travelers and corporations sick of this nonsense, there is an option: Switch from the major airlines to the low-fare carriers, which have a more reasonable pricing structure.
There is a reason that Southwest and JetBlue, as well as other low-cost carriers, have been able to weather the current economic downturn: Many of these carriers have been able to create a business model that provides an excellent product for their customers while keeping their costs under control.
There no longer is a standard definition of "low-fare." That term used to mean "no frills" -- i.e. no meals, no preassigned seating, no first class cabin and low walkup fares. But now, low-cost carrier AirTran has a business class, and JetBlue offers preassigned seats.
Perhaps the best way to define the low-fare carriers is by the actual fares they charge for same-day travel.
For instance, a passenger cannot walk up to the United Airlines counter and buy a $242 refundable, one-way ticket from Tampa to Chicago, as the low-fare carriers typically offer. Instead, a recent United charge for that same-day purchase would be about $798.
Whether you attribute the success of these low-fare carriers to keeping down labor costs or to flying the same type aircraft with more efficiency, clearly they have succeeded where the major airlines have failed.
The darling of the low-fare carriers, Southwest Airlines, continues to earn kudos from passengers, analysts and a variety of industry observers. In Fortune magazine's most admired companies list last spring, Southwest ranked second among companies across all industry groups and first in the airline industry.
Because Southwest charges no fee for changes, has no "use it or lose it" rule for nonrefundable tickets and charges a maximum fare of $299 each way for any city pair, it is easy to understand why it captures well more than half of the discount air travel in America.
Another favorite of business travelers is JetBlue, although its route map is not nearly as extensive as Southwest's. Passengers fortunate enough to be in one of the cities JetBlue serves can enjoy live satellite television with up to 24 channels, new Airbus A320 aircraft with all-leather seating and a new frequent flier program.
JetBlue's fare structure is similar to that of Southwest, with a maximum walkup fare of $299 each way. JetBlue's ticket change fee is a relatively low $25, and the carrier has no "use it or lose it" rule (as long as the ticket is canceled before departure). Those are prime reasons why JetBlue was voted best domestic airline (coach class) in Conde Nast Traveler's 2002 Business Travel Awards.
Other low-cost carriers, such as Frontier, Spirit, America West and AirTran, offer similar fares and lenient change fees and rules. And some of these carriers even permit name changes on a purchased ticket for a small fee -- unheard-of with the major carriers for all but their largest corporate clients.
Although most major U.S. companies still have point-of-sale contracts in force with the major airlines, the tide is turning. It is hard to justify a financial relationship with an airline when the benefits to the corporation have dwindled to the minimum.
-- Sheila J. Kittle is vice president of corporate travel for Raymond James Financial.
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