Are Business Air Fares Unfair?

The first streaks of morning light were evident when Paige Bevington left her midtown Manhattan apartment at 5:45 a.m. Wednesday for New York's LaGuardia Airport and a flight to Chicago.

The trip began like almost every other in the past five years for the young auditor at Interpublic, the giant New York advertising and marketing services company.

But that was almost the only thing the same about this business trip. Instead of flying roundtrip to Chicago, Bevington is flying from New York to Chicago, then to Detroit and back to New York. Interpublic used a mix of advance purchase tickets, a low cost airline and corporate discounts, and less popular airports like Chicago Midway and Detroit Metro.

Her airfare cost $542.44. Interpublic said it saved $1,600.

Bevington's employer is one of a growing number of companies in a near revolt against the high, unrestricted business fares. Since the recession and Sept. 11, they have been doing everything they can to lower the cost of travel and avoid those high business fares.

"Interpublic does approximately 100,000 tickets a year in North America," said Kathleen Kaden, the company's travel manager. "If each traveler saves $100, that's $10 million."

The Slow Return of the Business Traveler

A survey by the Business Travel Coalition, an association of companies that for several years have fought high business fares, says 56 percent of the nation's biggest companies so far this year have turned to restricted, discount tickets and low cost airlines. That's double what it was three years ago.

Some companies are now keeping their employees at home, using teleconferences or Internet meetings. Others are driving or taking the train.

The nation's eight biggest airlines reported staggering losses in the first quarter totaling $2.5 billion. All cited the slow return of the business traveler for much of their predicament.

Says Delta Air Line's Chairman Leo Mullin: "We need to have the business traveler come back and we need the business traveler, some portion of them, to pay the full fare. And if in fact that does not occur, or if it remains substantially below past levels, we have a problem moving ahead."

Simply stated, the big airlines, with their current cost and fare structure, would be hard-pressed to make a profit without the high-fare business traveler. That has long been the airlines' bread and butter — 25 percent of their passengers, but 50 percent of their revenue.

While leisure travel has been recovering, business travel has not. By one measure it is still 20 percent below what it was a year ago. "The business traffic environment is incredibly weak," said Michael Gunn, an executive vice president at American Airlines.

Hassle Factor, or Higher Fares?

In the past business travel snapped back automatically as a recession ended, but not this time.

The airlines say that's mostly because of the economy and the "hassle factor," the difficulty in traveling: long lines at airports, lengthy check-in and security requirements. That, with reduced flight schedules, say the airlines, makes business travel less productive.

But others argue it's mostly about high fares. A one-way leisure fare at the beginning of the year averaged just $106, according to American Express, while the unrestricted one-way business fare averaged $580. The same survey shows there's a big gap between business fares and what corporations, like Interpublic, are actually paying, on average $273.

"We're paying significantly more so the leisure traveler can afford to travel," said travel manager Kaden.

So why don't the airlines simply lower their business fares? "Were we to lower our business fares," said Delta's Mullin, "we would create an economic problem" and the already deep losses would become deeper.

The airlines don't believe they can stimulate much business travel in a recovering economy with lower fares. And besides, they argue, it's not that simple.

Mullin points out that the airline keeps a 10 percent slice of its seats reserved for the last-minute business traveler, seats sold at high fares. "Were we to take some other approach to it, we'd be selling out all our seats in advance and there wouldn't be any seats for that last-minute traveler," he said.

Rebound Appears Long Way Off

What's needed, say corporations and business travel advocates, is a restructuring of the airline's complicated fare system.

"Business travelers have made one decision," said Maryann McInerney of the National Association of Business Travelers, "when they are not getting the prices they want, they stay home."

The critical question for the airlines is how long that impasse will last.

After the Gulf War, air travel recovered in about six months. The latest forecast from the Federal Aviation Administration is that air travel won't return to pre-Sept. 11 levels until 2004.

"I think it will be back," said Mullin, "in the period of 2003. I doubt very much it will go to 2004. If it lasts that long, it could be the source of a very significant industry crisis."