US Air Wields Kiosk Fares In NE Fight

US Airways is offering individualized, volume-based walk-up fares available only through self-service airport kiosks for its Northeast shuttle as it battles against the Delta Shuttle and, increasingly, Amtrak for corporate clients. Within the past six months, 25 to 30 clients already have negotiated such fares.

The development reflects efforts by both airlines to add value to their Northeast shuttle operations in response to a noticeable passenger migration away from planes. Key to attracting corporate clients on routes between Boston Logan, New York LaGuardia and Washington Reagan National, the shuttles have suffered since Sept. 11. Corporate travel budgets remain constrained, National Airport was closed longer than any other airport after the terror attacks and the perceived airport hassle factor either has dissuaded businesspeople from making day trips or prompted them to get in their cars or turn to Amtrak.

With several stations in New Jersey, the rail carrier also is gaining traffic from airlines operating at Newark International Airport. However, Continental Airlines recently began code sharing with Amtrak between Newark and four Northeast cities, further solidifying its position as a top competitor up and down the Northeast corridor. Continental dominates jet flying between its Newark hub and Washington, but battles head to head with American and Delta on the Newark-Boston route.

Travel managers throughout the Northeast said many more of their travelers are opting for Amtrak versus traditional air shuttle transport.

According to Amtrak officials, overall market share in last year's fourth quarter grew quarter over quarter from 53 percent to an estimated 58 percent in the New York-Washington market and from 35 percent to an estimated 38 percent in the New York-Boston market.

US Airways vice president of sales Steve Tracas acknowledged a drop in shuttle passengers since Sept. 11 and called Amtrak "a viable competitor," but said the airline tracks share only against Delta. US Airways would not divulge its latest comparisons. However, according to Aviation Daily and U.S. Department of Transportation statistics, Delta's market share of 56.8 percent beat US Airways' 43.1 percent, when comparing the two with each other on the LaGuardia-Boston route for the 12 months ending Sept. 30, 2001. In the same context, Delta again had the edge—52.3 percent to 47.7 percent—in the LaGuardia-Washington National market.

After Sept. 11, both Delta and US Airways crafted marketing campaigns touting the faster plane trips versus the trains on shuttle routes, and insisting curb-to-gate times are under 20 minutes. Delta actually guaranteed it, backing it this spring with a 20,000-mile frequent flyer bonus.

"We never tried to compete on speed but instead have marketed our frequencies and onboard amenities," said David Lim, Amtrak vice president of marketing and brand management. "The airlines think they are at war with us. We don't look at it that way. In fact, both airline campaigns helped us to raise the value and awareness of the Acela brand."

Amtrak's Acela Express now offers 16 frequencies between New York Penn Station and Washington Union Station, and nine from Boston South Station to both New York City and Washington. It includes two-class service with two-by-two seating, power ports at each seat and meeting tables on all business class cars.

"Surprisingly, we are using a lot of Amtrak out of both Boston and the Route 128 station (southwest of Boston) to Washington, Newark and Baltimore," said a Boston-area travel manager, noting that rail trips, totaling "just a handful" last year, have grown markedly this year. "The carriers are looking at this as a temporary development, but, from our perspective, travelers get business class when they book on Amtrak. People do not want the hassle, the expense is lower and it is more comfortable."

Another Boston-area travel manager said his company's spend on Amtrak is up 75 percent year over year, a "definite anomaly" in terms of the company's overall travel trends.

"The corporate sales effort really started in earnest as we started rolling out the Acela product," Amtrak's Lim said, "and now our share is growing within existing corporate customers' travel programs."

Furthermore, a nascent partnership with self-booking provider GetThere, a Sabre subsidiary, still is in the developmental stage. Once active, it should provide Amtrak with additional visibility in the corporate market.

In mid-May, the rail carrier increased fares on certain weekday peak times, creating differing demand-based price points. "We are keeping some seats open for other premium travelers," Lim said. "We hope to really inventory-manage the trains soon, but we are not there yet."

Meanwhile, aside from advertising campaigns, Delta and US Airways each are improving their respective shuttles by deploying more kiosks and moving forward with terminal projects. US Airways has advanced the value proposition a step further, offering the exclusive kiosk fares.

According to the carrier, the entire T&E card-driven kiosk transaction, including purchase, seat assignment and boarding pass can be executed in less than a minute and allows travelers to input department codes and travel managers to collect the data. With additional kiosk deployments, US Airways will seek to develop similar shuttle fares for additional corporate clients and consider expanding the program to other network destinations.

"With a number of corporate partners, we constructed a fare that reflects ease of use, improved technology and avoiding intermediaries," Tracas explained. "Normally, it is a customized fare to be used just through kiosks, and not accessing existing corporate fares, but we can do that also."

Kiosk transactions are made possible by proliferating electronic ticketing, now accounting for 78 percent of all US Airways tickets. Tracas noted that certain airport stations process as much as 35 percent of all eligible tickets through kiosks.

US Airways' shuttle product includes service on Airbus 320s, with increased seat pitch and width, new or refurbished terminals at all three airport locations and, according to carrier officials, "phenomenal" on-time performance.

Unlike Delta, US Airways also offers Boston-Washington National flights, but after Sept. 11 Washington Dulles was removed from the shuttle network.

For its part, Delta has not adjusted its pricing, though pre-existing corporate fares are available through airport kiosks at all three airport locations via the SkyCard program (BTN, Aug. 3, 1998). "Corporate agreements are working well, but I am not sure fares need to be addressed," said Lee Macenczak, Delta senior vice president of sales and distribution. "But we'll be competitive and are not going to let share go away."

Though some shuttle clients—Delta's and US Airways'—have been known to secure fixed fares discounted by as much as 60 percent from the full-fare walk-up price, Tracas said that figure is unrealistic. "Most corporations negotiate the shuttle as one segment in the context of a larger deal. Rarely are standalone shuttle deals negotiated," he said. "Our corporate fares for the shuttle are aggressive, but so are our expectations for reaching hurdles and achieving significant compliance."

Meanwhile, regarding the 20,000-mile frequent flyer bonus backing Delta's 20-minute guarantee—which last week was extended to June 30—Macenczak said only one such award had been issued since the promotion was announced in mid-April. "It is not a price issue, but a perception issue."

Across the Hudson from Manhattan, a large base of New Jersey-based companies deals with a different competitive landscape, primarily centered around Continental and, to a lesser extent, American and Delta services from Newark and increasingly Amtrak's Acela.

"Acela still has a long way to go in weaning travelers off frequent flyer programs, but it is very competitive from a pricing standpoint," said a travel manager at an area company. "Out of New Jersey, competition has increased and that certainly is positive."

Continental stands to lose to Amtrak less than other airline competitors and may benefit from the rail carrier's emergence in the corporate travel mindset, thanks to the new codeshare arrangement. The agreement includes Amtrak service to Newark from Philadelphia, New Haven and Stanford, Conn., and Wilmington, Del., and frequent flyer mileage credit.

Sources indicated the airline is "poaching a little in fringe areas," where travelers otherwise would opt for service from Philadelphia, US Airways' Northeast hub.

According to Dave Hilfman, vice president of multinational sales and revenue programs at Continental Airlines, the Amtrak codeshare is "spooling up nicely" for both general consumers and managed business travelers. "We are seeing many corporations that can use their corporate programs as long as the bookings use the codeshare," Hilfman said, referring to "folks coming out of South Jersey and Philadelphia."

"You can read a lot into that association," suggested a N.J.-based corporate travel manager speaking on the condition of anonymity. "Continental is reading into the future of the market."

Continental acknowledged that it has had to become more price-competitive on the Newark-Boston route against American and Delta, but its frequencies—11 dailies versus AA's five and Delta's four—means it controls the market. "Continental is very resolute; that is their bread and butter and they have run carriers out of the market," said one travel buyer, also speaking anonymously, citing Delta's flight reduction from eight to four. "They use their frequencies as the differentiator, as well as bigger jets and two classes of service. They know their prices are unreasonable, but will probably stick with them until someone comes in with a better product."

"Between Newark and Boston, we do have a competitor, but we have big jets and a great new facility," Hilfman said. "We are feeling real good about that."

An American spokesperson said, "Our pricing policy is competitive. When any action is taken, we make whatever response we deem appropriate."

Continental's market dominance is even more pronounced between Newark and both Washington Reagan National and Dulles. The nearest competitor, aside from Amtrak, is United Airlines' multiple daily frequencies to Dulles.

Meanwhile, Continental last month went all-jet at Newark as the last ExpressJet flights, including service to Dulles and Baltimore Washington International, transitioned from turboprop aircraft. The carrier during the winter also opened a new concourse and a new international arrivals facility at its Newark Global Gateway.

Another aspect of Northeast competition is service from New York JFK. Though the airport is viewed by many as a transcon and international gateway, many nearby companies can use American, Delta and United on certain short-hop routes in the Northeast. American Eagle, for example, in March restarted five daily roundtrips from JFK to Washington National aboard 37-seat ERJ-135 regional jets. It also offers two dailies between JFK and Washington Dulles.

Of course, there are many other air transport options throughout the Northeast that may be more beneficial to certain companies, based on geography and travel patterns. At Baltimore Washington International Airport, for example, US Airways still provides multiple daily frequencies to Boston, LaGuardia and Newark. But Southwest Airlines has muscled its way in and also provides service to Long Island Islip and Providence, R.I.

US Airways' potential bankruptcy filing, mentioned again as a possibility by the carrier in a Securities and Exchange Commission filing last month also is complicating matters in the Northeast and concerning some corporate travel managers. Should US Airways opt for reorganization, it remains to be seen how the shuttle would be impacted and which, if any, buyers come knocking.

However, US Airways is focusing on a recovery plan that likely will include domestic codesharing with a carrier other than Delta, a top adversary. Should the codeshare link US Airways with Continental, a possibility discussed in recent weeks by executives at both carriers, it could help US Airways offer a larger network reaching into the South and Midwest, while giving Continental yet another Northeast advantage.

Tracas added that the Northeast shuttle is crucial in the carrier's attempt to move forward. "Our key markets in the East are Boston, Washington and New York, which of course are the biggest business markets on the East Coast," he said. "Even though there are alternatives to the shuttle, the key is the significant time difference. It is a compelling story that Corporate America needs to be reminded of."

Meanwhile, despite increasing passenger levels, Amtrak's future is questionable and it does not expect to achieve self-sufficiency by year-end as originally planned. "Amtrak has expanded some horizons. Our people are using rail for lots of reasons," said Tom Barrett, global strategic sourcing director at American Standard Cos. in Piscataway, N.J. "But will it be enough to make Amtrak profitable? Like the airlines, the issue is the high-cost infrastructure."