Surge in Business for Alternative Transport

Aug. 11, 2006 — -- Long lines formed at airport car rental counters across the country today, and train and even private jet companies saw an uptick in inquiries from travelers looking for alternative forms of transport.

But it remains to be seen if the spike in interest will be sustained if American travelers shy away from commercial airlines after today's foiled terror plot.

After British police thwarted a plot to blow up several commercial airliners headed to the United States, the cancellation of flights and tighter security restrictions led to extended wait times at many airports. To avoid the long waits, thousands of travelers flocked to car rental companies.

But it's possible the increased business will be temporary. One car rental analyst noted that much of today's business came from travelers merely trying to get home. That does not guarantee they'll book rentals in the future.

"I don't think it's a benefit to car rental companies at all if fewer people fly," said CL King & Associates analyst Michael Gallo. "If the airlines have fewer fliers, the rental companies will have fewer customers."

Major rental companies like Hertz, Dollar Rent a Car and Thrifty Car Rental get 75 to 90 percent of their customers from airport business. Any interruption in air travel would have a corresponding effect on the number of customers renting cars.

"Their businesses certainly are correlated," Gallo said.

The one advantage car rental companies have over commercial airlines is the ability to adjust carrying capacity in the event of a downturn. Airlines often struggle when passenger numbers go down because it's difficult to rearrange their carrying capacity.

But car rental companies have agreements with automakers that allow them to return cars when passenger numbers fall. Most rental companies did exactly that when flight capacities fell 15 to 20 percent after the Sept. 11 terror attacks, and many saw big profits in 2002 with smaller fleets.

"It's really too early to say if people backing away from the airlines is a pattern. So they won't be thinking of doing anything like that yet," Gallo said.

The economic losses or benefits will take several days or weeks for most businesses to assess. Amtrak, the nation's largest interstate train service, also saw increased customer inquiries today. Amtrak reported a 15 percent increase in call volume, but a company spokesman said actual sales figures won't be available until Friday at the earliest.

If You're Going to Fly, Why Not Fly in Style

For those with the means, private jets were another alternative.

"We began seeing it almost immediately. Web site traffic and incoming calls were up more than 400 percent today over a normal day," said Nathan McKelvey, CEO of Jets International, a company that sets up well-paying customers with private jet service.

Private jet travel has grown from an estimated $2 billion industry in 2001 to an estimated $5 billion today, McKelvey said. The industry saw a huge increase in passenger interest after the Sept. 11 terror attacks, mostly from business travelers who didn't want to wait through the longer security delays.

"After 9/11, there was a dramatic increase in the amount of time people spent waiting in security lines," McKelvey said. "People were willing to pay more to fly [in private] jets because they could put an actual value on their time and realized it made economic sense to avoid the waits."

But the pickup in business after Sept. 11 wasn't without negatives. While the number of companies willing to pay for private jets may have increased, there was an overall reduction in business travel. The hope within the private jet industry after the latest security scare was that, because law enforcement was able to pre-emptively stop the alleged terror plot, companies would again look for alternatives to commercial airline travel without becoming skittish about their overall travel budgets.

But even with a one-day, 400 percent increase in inquiries, McKelvey was realistic about whether that would translate into an influx of new customers. Much like the rush to car rental counters, many of Thursday's inquiries may be from one-time customers.

"A lot of that was for one-way travel -- people looking to get home from wherever they're stranded," he said.