A new survey indicates that corporate use of low-fare carriers for meeting and group travel has increased despite last year's decision by the largest of the low-cost airlines, Southwest Airlines, to eliminate meetings fares. However, while the use of low-cost airlines is gaining wider acceptance, airline choices still seem to favor the majors, particularly when buyers consider such factors as frequency of service and benefits from existing contracted agreements.
Meeting buyers' dealings with low-fare carriers soon could change, though, as JetBlue Airways considers the deployment of its first meetings program and ATA Airlines, which offers a group discount, last month filed for Chapter 11.
According to a recent Meetings Monitor survey of 205 corporate meeting buyers, 70 percent reported that their organizations did use low-cost carriers for meetings. The findings indicate growth in usage over 2003, with 55 percent of attendees choosing low-cost carriers for at least a quarter of their trips, in comparison with 47 percent last year.
Southwest's November 2003 decision to discontinue meetings fares (Meetings Today, Dec. 8, 2003)
has not hurt business at the airline at all, even among corporate groups, said senior director of marketing and sales Richard Sweet. Southwest gets some indication of group business through customers who use its corporate booking tool, Swabiz. "Use of our Swabiz product has almost doubled in the past year, and we know that some travel managers are using it for their meetings as well as individual travel," Sweet said. "As for other meetings, we don't really know. What we do know is that travelers who are going to a Southwest destination are using Southwest."
Sweet said the airline's decision to terminate its meetings fares was the right choice. "We were accruing costs and it just didn't make sense to continue to offer these fares," he said, "We've just had five months of record load factors."
Sweet believes that the advent of low-cost carriers, which have caused airfares to become much more competitive in the markets they serve, has lessened the need for meetings fares in general. "In the old days of airline pricing, when business travelers got stuck paying $1,000 fares, there was a real need for group discounts," he said. "Today, everyone is taking advantage of the lowest possible fares."
Not all low-cost carriers agree that there is no need to offer specific incentives for the meetings market. While New York-based JetBlue does not yet offer a meetings program, the airline is considering establishing one in the near future, according to business development manager Sonia Hagen. "We'd like to have something that's automated and online," she said. "This would be the next step for us—the last one was to establish CompanyBlue."
Introduced last June (BTN, March 29),
the airline believes that CompanyBlue, its corporate booking portal, has prompted more corporate group and meetings business for JetBlue, Hagen said. "We just don't know the amount, as it's hard for us to decipher how much is group business and how much is individual."
Among low-cost carriers who actively target the meetings market is AirTran Airways. According to director of marketing Tad Hutcheson, corporate meeting business is growing by about 25 percent a year for the Orlando-based airline, which has its largest hub in Atlanta. "We're a relatively small airline and we're very flexible for groups," he said.
AirTran offers Event Savers, a meetings program that provides an 800 number for planners and discounts of 5 percent to 10 percent off published fares, depending on the size of the meeting. "We offer everyday low fares, so there's not a lot of meat to cut off the bone," said Hutcheson.
Denver-based Frontier Airlines also is targeting meetings, primarily through sales efforts aimed at boosting corporate travel overall, according to airline spokesman Joe Hodas. "Meetings are a growing area for us and we want this business," he said. Along with encouraging corporate clients to use Frontier for their conferences, the airline also works with the Denver CVB as a way to tap into meetings coming to the city.
According to Hodas, Frontier's meeting program operates on a case-by-base basis. "We offer a standard 10 percent discount for groups, but there is room for more negotiation if it is a large group," he said.
Hodas sees a shift in attitude among corporations in the use of low-cost carriers in general. "The reputation for service and amenities was not there, but we've disproved this," he said. "There was also concern about the size of the network and frequencies, but now we're serving 45 destinations in the U.S. and have reached critical mass on this issue."
Terry Eggers, regional director for Des Moines, Iowa-based Air Fulfillment Services, which manages air travel for meetings management and incentive companies, agreed that the no-frills aspect of low-cost carriers is no longer much of an issue. "People have been bitten by the poor service on the major carriers, so the low cost carriers don't look so bad anymore," according to Eggers. "And the low cost carriers are no less reliable than the majors."
According to Eggers, more companies are choosing to use low-cost carriers, particularly Southwest. "Discontinuing their meetings program didn't hurt them at all—people really like the simplicity of their fare structure," he said. He also credits the development of such corporate booking tools as Swabiz and CompanyBlue. "The fact that these carriers are making it easier for companies to track and book on the Internet is having a positive impact on corporate meetings," he said.
However, Eggers also notes that the major airlines have learned to stay competitive with low-cost carriers by often matching their fares. At the same time, he believes that airline meeting programs offering group discounts, zone fares and/or credits toward ticket accrual hold significant benefits for groups, particularly large ones. "In some markets, you will save money by booking a major carrier that has a meeting program rather than a low-cost carrier that doesn't have one," he said.
Dave Sonricker, senior vice president and general manager of World Travel Meetings & Incentives in Chicago, agreed that the low-cost carrier is not always the cheaper alternative.
"It really comes down to best access and what concessions airlines are willing to make," Sonricker said. "You also have to consider your clients' corporate contracts with carriers in leveraging business. If you have a preferred carrier, it could be more cost effective to work with them than a low-cost competitor."
Although low-cost carriers rapidly are expanding their reach as well as their frequencies, often it is still not enough. While Rick Wakida, global travel manager of OpenWave Inc., noted that individual travel usage of low-cost carriers is up at the mobile software company based in Redwood City, Calif., the same is not true for meetings. "For the most part, the low-cost carriers in the United States do not have good coverage in the cities where we meet," he said.
For some corporate meetings, the low fares offered by discount carriers are meaningless if they do not also offer frequency of service.
"Airfares are not a big concern as they are so deflationary these days. Risk management is a bigger concern to our clients," said Peter Klebanow, president of Ultramar Travel Management in New York. "They want a good frequency of flights and they don't want people getting stuck. They want to be no more than 30 minutes from a major airport. The ease of getting in and out is important."