"It was months of panic, basically. The stress was very difficult," says Gail Girard, director of meetings at the New Jersey State Bar Association in New Brunswick. She's describing what happened when a certain major airline decided to cancel a flight to the Bahamas that her attendees were counting on. "To say we had a breakdown is an understatement."
After months of almost daily calls to the cash-strapped carrier's group sales department, Girard finally convinced the airline to reinstate the flight she'd carefully reserved well ahead of time. But when the big day came, some attendees were still bumped from the too-small aircraft, and they ended up riding a sketchy, amphibious prop plane to their meeting. It was a disaster, says Girard. "They lost attendees' luggage and I heard all about it. One woman burst into tears at the airport!"
Anyone who flies a lot has horror stories to tell, and anyone who's planned travel for a meeting can identify with Girard's frustration with the carrier's group sales department. But the truth of the matter is that things are actually getting worse for the airlines. Cost-crunched carriers are cutting routes and services while they struggle to make fare increases stick. Multiple major airlines are in bankruptcy and it's very possible that by this time next year, one of them will be flying no more.
But attendees and planners depend on the airlines to get to their meetings, and the changes the carriers are making will affect your meetings. That's why it's important to know what's going on in the airline industry, whether you deal directly with the airlines or not.
Turbulent Times
Since the deregulation of the airline industry in 1978, it seems the airlines' prospects have gotten steadily worse, but in the last few years a full-blown crisis has developed. The September 11 attacks, skyrocketing fuel prices, and the Internet's emergence as the industry's preeminent distribution channel (which allowed easy fare shopping, and destroyed the carriers' careful pricing schemes) have all conspired against the majors. Add the new low-cost airlines to the mix, and it's easy to see why the traditional carriers—United, Delta, American, Northwest, Continental, and US Airways—are struggling to change the way they do business.
It's a rough time for all the airlines, but with very few exceptions, the major carriers' balance sheets and business models are far worse off than those of the low-cost and regional airlines. United Airlines has been under bankruptcy court protection for almost two years, and has twice been denied the federal loan guarantees it needs to resume normal operations. In September, US Airways entered bankruptcy protection for a second time, and this time experts say liquidation is a real possibility. Delta Air Lines is threatened by bankruptcy as well, with high labor costs prompting some analysts to predict a Chapter 11 filing before the end of the year. And American and Northwest are also feeling the high costs and tough competition, as both carriers frantically try to cut costs and raise fares in an extremely competitive environment.
Despite the daunting challenges the major airlines face, most experts agree that most will keep flying for some time to come. However, they'll have to alter their business models to survive, probably becoming more like the relatively vital low-cost airlines.
But although the low-cost carriers have a simplified approach to booking group travel, the traditional carriers haven't yet indicated any major shifts in the way they service meetings. "Meetings remain an important part of our business during our transition through bankruptcy, which contemplates US Airways' becoming a kind of hybrid of a low-cost carrier and a traditional airline, with more point-to-point service and a simplified fare structure," says US Airways spokesperson Amy Kudwa. "Meetings business, particularly in the pharmaceutical sector, has been strong for us, and we expect that strength to continue."
And US Airways and the other majors are clearly attuned to changes in the meetings industry. "We realize there is a bit of a shift with the price transparency of the Internet and attendees booking online outside of the negotiated rates, much like the situation with attendees booking hotel rooms outside official room blocks," says Kudwa. To snare rogue bookers, she says, US Airways is working on a new meetings section for a redesigned Web site. "It would have the negotiated rates as well as the fares available to the public, so attendees could have access to all fares," and all tickets could be tracked.
Price Wars
Over the years, the majors have evolved a standardized system of deals for groups and meetings, which must have at least 10 participants to qualify. The discounts for groups fall into three categories: percentage discounts, zone fares, and block pricing.
For example, American's percentage discounts on published fares follow the industry norms, says George Coyle, product manager at the carrier's groups and meeting division in Fort Worth, TX. "We take a percentage off the published airfares, and all the rules and restrictions of the fare apply. So if it's a nonrefundable or Saturday-night-stay fare, you'll follow the rules of that fare." A 5-percent discount is the industry standard, Coyle says.
The second kind of group pricing the carriers offer is called zone pricing, where the planner and the carrier agree to the maximum fare for tickets between any two markets, or zones. (At American, there are seven zones across North America.) The deal can be struck up to two years ahead of a meeting, Coyle notes, and it provides the planner with the assurance that ticket prices won't exceed a certain level, while it still allows the planner to take advantage of fare reductions that might occur. "Zone fares are a great tool for incentive planners," says Coyle. "If you're doing a sales incentive, and you're going to host the meeting in Hawaii, you have to set it up two years out, to make sure you have the rooms for attendees. You might not know who's going, but you might know how many. With zone fares you can build your budget, including air travel."
Those are two most popular types of group discounts the major carriers employ, but American also has an option called "block space" for groups that want to travel together. "When at least ten people have the same itinerary, we'll block out the seats they want for the itinerary and then, for a small deposit, we'll hold those seats."
Upgrades for Groups
Flexibility is the word when it comes to dealing with meeting planners, says Coyle. "Because of the environment, we are trying to be flexible to meet the planners' needs rather than going out with a canned offer." Thus, American also offers groups other perks, like one free name change per seat at no cost and one free ticket for every 20 domestic, or 40 international, group tickets sold. American may also provide upgrades to a better class of service, or discounts with its car rental partner, Avis.
"The demand for our meetings products has been very strong," says Coyle. "We have positive growth year over year, consistently."
Planners who want to talk business with American's meetings department must come prepared with the specific date of the meeting, the location, and an idea of how many attendees will be flying there, says Coyle. "With that information, we can see what flights we have, and steer groups to emptier flights, saving a lot of money."
In contrast to the major carriers' complex meetings programs, the low-cost carriers' simplified fare schemes mean everyone pays the same price for tickets. Rob Brown, director of corporate sales for Southwest Airlines in Dallas, TX, says the low cost-carrier's corporate and group travel offering, Swabiz, offers no discounts, but is extremely popular anyway. "Essentially, Swabiz is [the airline's consumer site] Southwest.com, but for business travel," he explains. "When corporations want to reserve travel online and have a way to track their travel spending, we can enroll them in Swabiz. It's online and totally free, and in addition to allowing access to travel reports and online fares, it saves by eliminating fees from third parties" such as travel agencies.
The program's growth, Brown says, is "a testimony to the cost savings and value that organizations are realizing. For the second quarter of this year, bookings increased 89 percent over the second quarter of 2003. Just recently, our August numbers were up 103 percent over last August." And Swabiz's 2004 enrollment of new companies is up 45 percent over 2003.
Brown says that the simplicity of the Swabiz program is a good fit for meetings. "Visit the site, fill out the form, and someone will get back to you within 24 hours." Does it matter if the meeting's not for a corporation? Not at all, says Brown. "Usually with meetings, the travelers are members of a company or association, and even if you have outside speakers attending, it's business travel for the event that your company is putting on. So we're okay with that."
SIDEBAR
Missed Connections
When ailing airlines cut flights, hub cities feel their pain
US Airways filed for Chapter 11 bankruptcy protection on September 12, and since then, folks in the airline's hub cities of Charlotte, Philadelphia, and Pittsburgh have been waiting to hear what the carrier's financial straits means to them.
Their concern is understandable. In Charlotte, NC, 500 US Airways flights come and go each day at Charlotte Douglas International Airport. The carrier accounts for around 95 percent of all flights there, and also employs about 6,000 people, according to Michael Crum, interim CEO of the Charlotte Regional Visitors Authority.
"They represent a very large piece of our hospitality, travel, and tourism industry," Crum admits. And even as the carrier is on life support, he says that the bureau continues to sell US Airways as "one of the assets that planners can employ when they hold meetings and events in the city." Part of his job is keeping clients informed of changes at the airline, which the bureau does through newsletters, e-mail blasts, and face-to-face meetings. Says Crum, "They do have a plan to transform the airline into a low-cost carrier, as I understand it, and the plan does not contemplate any reduction in service for Charlotte."
Still, Crum says the city's status as a hub had its drawbacks even before bankruptcy. "You pay for the accessibility you get from having an airline's hub in your market," he explains. Because of US Airways' near-monopoly, he says, "Flights that depart Charlotte can cost double what they would if you drove to a nearby airport."
The situation is a little different in Philadelphia, where US Airways doesn't dominate as it does in Charlotte, says Jack Ferguson, vice president of convention sales at the Philadelphia Convention and Visitors Bureau. Service from traditional carriers United and Continental, as well as new flights from low-cost carriers Southwest and Frontier, keep things more competitive in that market. "The fact is that Philadelphia is a big city and there are other carriers," says Ferguson. "Our customers are watching this situation, and they're very flexible. They follow what is going on with US Airways with regard to their conventions."
Still, Ferguson says people in Philadelphia are "very concerned" about the bankrupt carrier's precarious situation. His advice to planners bringing groups to the city? "Tell attendees to pay [for US Airways tickets] with a credit card. That way, if there's a problem, their purchases can be refunded, and they can find alternate flights."