Corporate Highfliers Take to Budget European Travel

Gone are the days when European budget airlines carried only the backpacking hordes that mainline operators squeeze into the tail end of the plane.

Business travelers are giving up lounges, cocktails and slippers for a cheaper ticket on short-haul work trips.

As business travel rises, so does the appeal of no-frills carriers — at least for bosses, if not for employees.

Over the past two years, the number of European business passengers on budget airlines almost doubled, according to a survey of 2,500 corporate card users released last week by Company Barclaycard.

The survey found that 53 percent of corporate travelers used a low-cost carrier at least once last year.

And with budget airlines increasing their flights across to European business destinations, discount players could snatch up even more of this lucrative segment of the airline market.

"The majority of business travelers believe business class on mainline airlines doesn't give value for money, so many are looking to the cheaper carriers," said Simon Chick, head of marketing for Company Barclaycard, a leading provider of Visa charge card services for business customers.

"This is across the board. It's driven by the desire to manage costs and is endemic of the rise of Internet bookings."

But while budget carriers are plundering the leisure business of their mainline rivals, it will be harder for them to be as popular in the corporate market, industry observers say.

Flying from airports that are further from city centers, issuing non-changeable tickets and offering no perks like frequent flyer benefits, budget carriers are less likely to be the airline of choice for a more seasoned business traveler.

"For the business traveler, there are many inefficiencies in using a low-cost airline," says Keith Tottem, spokesman for the Guild of Business Travel Agents.

"If you miss your flight, you could end up paying the same fare as a regular airline and still get no food or drink."

Small, Medium Firms Main Flyers

Company Barclaycard's findings are confirmed in the traffic figures of budget airlines that are populating European skies, offering only one class of service, making passengers pay for their meals and often not giving pre-assigned seats.

Over half the passengers on EasyJet, Europe's second largest budget airline, now travel for business compared with 40 percent at this time last year, says spokesman Toby Nicoll.

At Buzz, the low-cost airline of KLM Royal Dutch Airlines, 41 percent of passengers flew for work last year, while business travelers made up more than one-third of traffic at Go, the low-cost airline put up for sale by British Airways Plc.

Travel is not confined to the lower echelons of corporate life. Recent research at Buzz showed that 72 percent of their business travelers were at the managerial level or above.

The bulk of business travelers are from small- and medium-sized firms that have limited budgets. They are lured by return fares from Britain to mainland Europe as low as $36 — a quarter of the most competitive prices from mainline carriers.

"We attract a different type of corporate traveler, not from the multinational but from smaller, indigenous firms which are more cost-conscious," says Howard Miller, finance director at Ireland's Ryanair, Europe's biggest no-frills airline.

Some 40 percent of traffic at Ryanair is for business.

But big multinationals are also catching on to the no-frills idea for work trips in Europe, where flight-time is rarely more than three hours — making larger seats and three-course meals offered in business class of mainline airlines less essential.

More than a quarter of those tapped by Company Barclaycard worked for firms with market capitalization of more than 100 million pounds, including UK blue chip companies such as Bass Plc, which owns hotel chains Holiday Inn and Intercontinental.

Phil Brown, country manager at Nokia, world leading mobile phone maker, is sold. "I'm impressed by the price, schedule and certainly the ease of access to Stansted [airport]," he said recently in East Anglia Industry and Business.

"Our travel planning is based on strict criteria of cost and time efficiency."

More Choice

Gauging rising interest from business travelers, low-cost airlines are making some adjustments to attract this segment of the travel market by offering more frequent services to key destinations — the number-one appeal for business travelers.

Mainstream carriers such as British Airways pump millions into sprucing up business classes because a rise in travelers who pay higher fares translates into higher margins.

Budget airlines charge the same for everyone, though business travel is still more lucrative as people travelling for work tend to wait until closer to departure date to book their flights — when fares on low-cost airlines are higher.

But budget airlines have to keep their cost bases low. Most fly to secondary airports that charge lower take-off and landing fees.

"People traveling on business tend to pay last minute so pay at the top end. They want is frequency and a service that can extend the length of their work day," Nicoll says.

EasyJet and Go fly from London to Edinburgh up to seven times a day during the week — considerable choice for travelers though far lower than 18 daily flights BA offers.

Ryanair flies up to 11 times daily from London to Dublin and three to Frankfurt. Easyjet flies five times to Geneva from London.

Though budget airlines' lowest fares are often unchangeable, missing a flight and buying a new ticket often still costs less.

Another reason for the rise in low-cost corporate travel is online booking, which has made it easier and quicker to buy tickets and often gives passengers more choice.

Company Barclaycard research showed Internet flight bookings in the business travel industry rose 30 percent last year.

More than half the respondents had booked business travel over the Internet — the first time in the history of the annual survey that online booking exceeded more traditional methods.

Some Perks Can't Be Beat

Despite the growing attraction of low-cost carriers for business travel in Europe, many say the budget airlines will not be able to catch up with mainstream ones.

Recent research has shown that for smaller firms the choice is between low-cost airlines or no business travel at all.

Secondary airports used by low-cost carriers are less accessible than main airports.

Despite recent efforts by the budget airlines, mainstream carriers also still offer more frequency on the busiest routes. Attractive perks abound for the business traveler — airport lounges, massages, limo services and frequent flier benefits.

Moreover, mainstream airlines offer companies travel packages, with corporate discounts in exchange for guarantees that they will be the carrier of choice throughout the world. These offers are now often offered to smaller firms as well.

"The mainline airlines are catching up," says Chris Tarry, airline analyst at Commerzbank in London.

"It's not only the network. It's the whole travel deal. The customer is not you and me. It's the company."