<B> AA Takes Zones Global</B>
By Lauren Bielski
In a nod to the growing prevalence of international meetings, American Airlines last month extended its zone fares to Caribbean and European destinations, as competitors Continental and United Airlines made their own adjustments to step up use of the fares.
The concept of international zone fares was first introduced almost two years ago by Continental, but no other carriers have since followed suit. Now, at a time when American is seeking--and United already has formed--global alliances with codesharing partners, American's rollout of international zones of its own is more than just another "me too" product. Rather, it is another step toward offering business clients more pricing options for reasonable international travel.
In the Caribbean market--where American dominates, but Continental is rapidly gaining market share--zone fares are applicable for travel to Bermuda, Nassau, San Juan, St. Croix and St. Thomas.
Zones also apply to American's European destinations, albeit with a more stringent 30-day advanced purchasing requirement. The carrier flies to Birmingham, Glasgow, London Gatwick, Heathrow and Manchester in the United Kingdom, as well as to Brussels, Frankfurt, Paris, Stockholm and Zurich.
In the Caribbean region, zone fares are being offered in response to the renewed popularity of those destinations for meetings and incentive business, said Rick Weber, American's managing director of group, meeting and specialty markets. To qualify, groups need only have a minimal block of 20 passengers and a 14-day advanced purchase window. Meanwhile, Continental has modified its own international zone fare program, introduced late in 1996, by lifting the penalty for changing bookings.
Though declining comment on actual sales figures, Brenda Davis, Continental's manager of group and incentive travel, said that "zone fare use, especially for midweek meetings, incentive programs and international travel, is increasing," and more planners are inquiring about the program. Continental is "seeing more group traffic to Europe and to Mexico, as well as the rest of Central and South America," she said.
In December, the carrier introduced routes to Caracas, Venezuela, Continental's 26th Latin American destination. "There are still tax issues that dampen enthusiasm for international conferences, but they will become more common--and we're gearing up for that demand," Davis said.
Although zone fares often don't yield as deep a discount as regular meeting fares, they are technically the only sanctioned option for international discounted pricing in accordance with the rulings of the International Air Transport Association, said Terry Tripler, editor of Airfare Reporter in Minneapolis.
"The 5 to 10 percent off domestic Y meeting fares technically aren't allowed by IATA," Tripler said. "As a result, any planner seeking an affordable option for moving groups probably contracts with zones--even if they don't actually wind up booking them."
Although the clamor for open skies has resulted in the IATA regulation being commonly overridden these days, zone fares do have the advantage of maintaining international approval over the life of the contract period and are, as a result, a straightforward way to avoid paying full-coach on international travel without contention, he noted.
Still, many planners remain confused about true options for business travel abroad. Chris Pentz, a former corporate planner who now heads Pentz Group Communications in Levittown, Pa., said that at a recent Meeting Professionals International committee meeting, the subject of affordable international travel was posed as board members discussed bringing non-U.S. members inbound on Delta.
"We were told that air carriers said IATA regulation makes discounting difficult, and we got the impression that the best way to handle a meeting in Switzerland, for example, is to go with a Swiss carrier," she said. "I don't know how competitive international zone fares are, but any option for domestically-driven discounts is better than none."
United also is trying to improve service to the group market and maintain its market position. United meeting sales manager Joann Bedrosian Ryan said the carrier in early November--and without much fanfare--introduced a restructured meetings product, called area pricing. The product has the fixed-fare characteristic of zone pricing, she said, but offers the probability of deeper discounts than the five to 10 percent off lowest published fare--which used to be the only meetings option available to United customers. But the new fares apply only to domestic meetings, not international.
Zone pricing, Ryan said, now is marketed exclusively to incentive groups, and United is issuing a policy to avoid "zone fare creep," in which travelers abuse the discounted fares by booking them for transient travel.
Vincent Hailey, United's manager of incentive sales, said the new product was developed in response to increased demand for zone fares for standard business meetings. "In many cases planners liked the fixed fares, but clearly we saw that zone fares didn't really fit as an alternative to 5 and 10 percent off lowest published fares. So we created a hybrid pricing model," he said.
Most of the major carriers have been experimenting with "combination contracts" that offer clients the option to ticket with either 5 to 10 percent off or zone pricing, depending on which is lowest at any given point in time, Hailey said. United thought creating a new fare category would offer both better yield management for the airline and more consistent bargains for clients.
But many planners and travel managers are not yet inclined to split hairs and ask for a "zone" when they mean any fixed fare pricing option that applies to groups. As part of its effort to spur usage, American now is booking domestic zone deals through the year 2000. That will impact associations more than corporate clients, but nevertheless signals ongoing support of fixed, reduced fares by the carrier.
"Domestic zone fares were previously only available for contract in 1998, but we now have extended them to 1999 and 2000 in response to the demand for them," said American's Weber, who temporarily has taken over the meetings manager responsibilities of Penny Chen, who recently left the airline.
Zone fares are available on American Airlines and Eagle flights to and from the contiguous 48 states, Hawaii and Canada, and to all cities served by American within Mexico.
Like Continental and Delta, American wants zone fares on the lips of its key meetings clients. "Surprisingly, many planners still aren't familiar with zone fares," Weber said. "I think many planners tend to focus negotiations on their company's rate and as a result, they don't always consider other options. We're working to raise the profile on zone fares and change corporate purchasing behavior.