American Plays Zone Defense

<FONT SIZE="+3"><B>American Plays Zone Defense</B>
<i>Responds To Delta Through Group Fare Initiative On All north American Routes</I>

By Lauren Bielski

American Airlines has just revised its zone fare program by simplifying the rules, tripling the number of cities served to 180 and drastically cutting rates.

The fares will be up to 80 percent cheaper than AA's seven-day advance purchase fares, and more than 200 percent off Y fares, said American's manager of group and meeting sales, Penny Chen.

Zone fares will now be available on all of American's U.S. routes, as well as all cities the airline serves within Canada and Mexico. The zone fares also will be applicable to American Eagle routes.

The revamping comes at a time when many of the major carriers are declaring their intentions-and loyalty-to the group market once again. Delta, which led the latest round of zone fare enhancements, issued a program with a more competitive fare structure and simpler rules in July (<I>Meetings Today</I>, June 24), and Continental also announced changes to its zone offerings this past summer.

Also announcing a major zone fare simplification was Alaska Airlines, which eliminated a complicated 12-zone program and replaced it with a two-tiered pricing plan. Called the "Visit the West" Air Pass Coupon, the program offers a $99 rate for flights to and from any of the 60 U.S. cities in nine states served; and the same rate for flights between cities in Alaska. In the next tier, flights between the continental United States and Mexico, and the continental U.S. and Alaska, cost $149.

A minimum purchase of two tickets is required, and all reservations must be booked "V" subject to availability. With 21 non-stop flights from Seattle to Anchorage daily and high traffic in the carrier's core hub between San Francisco and San Diego, Alaska Airlines has been experiencing consistently high traffic. Still, she said, Alaska is looking to attract a greater share of the meetings market, said Toni Freeberg, manager of international sales and special markets.

United Airlines' director of business markets for the U.S., Joe Laughlin, said that any move by two major competitors to drop fares by 20 percent could force United to re-evaluate its fares-although, he added, the airline would proceed cautiously because any reductions would reduce revenues for trips booked three months in advance. "We've been holding our own in incentive sales, and we watch our competitors very closely," Laughlin said in response to the announcement.

The desire to be aggressive in attracting group sales also fueled American's effort. "We are in a period of rigorous evaluation of all our fares, and our current strategy is to increase our incentive business," Chen said. In early 1997, the airline will announce a fare program designed to attract groups to low-traffic destinations and a significant revision to its inter- national program.

The first wave of changes includes an increase in the number of zones offered from six to eight regions, and an increase in the maximum stay to 30 days. Open jaw routing will be allowed at either origin or destination within the same zone, but not both.

Another revision allows names and ticketing to be submitted seven days prior to departure or seven days after booking, allowing for last-minute submission of attendee names and saving a penalty fee of $50. In the same vein, American has lifted penalties for block cancellations as long as they are made 120 days prior to travel, eliminating a $10 cancellation fee.

American saw the writing on the wall when Delta announced its program and recognized that, in general, there was increased competition for group business-despite impressive load factors enjoyed by most of the major carriers.

Prior to Delta's revisions, zone fares had crept skyward in recent years, forcing planners to engage in creative purchasing strategies to keep their budgets in line. However, Delta-with American and others close at its heels-has tried to bring the zone product in line with alternative pricing that required planners to "shoot through hoops of fire" to obtain the discount, said Gail Childs, system manager-meetings and incentives at Delta.

Although Delta's new program began late in the year, the response has been "tremendous," and the base of zone fare users has increased significantly, Childs said. While Childs wouldn't release figures, industry sources estimate that about 10 percent of corporate groups use zone fares.

"We extended this to all of our corporate customers, whatever the terms of their existing contracts," Childs said. "It was our way of building our relationship with them, meeting their needs for a product that was easy to use, budget for and work with." Childs said American's announcement is yet more proof that group business was valuable to airlines.

'No One Comes Close'

Word of the announcement also pleased Dawn Levesque, an American Express Group Travel Management Services planner based in Moline, Ill. "We use American's zone fares all the time, and the terms of the revised program sound like they will be extremely helpful," she said. Levesque recalled that she had relied on zone fares many times for trips to Palm Springs and said "no one else can come close" to the discount she received.

While zone fares are not the panacea for containing costs in every group travel situation, Chin said the attraction of zones is their stability-a characteristic that always makes them a good choice for midweek meetings in which a Saturday night stayover would be a problem.

With respect to corporate meetings, whether or not "the new" zone fares will deeply affect the market is uncertain. One former airline executive who spoke to <I>Meetings Today</I> anonymously pointed out that in one sense, many corporations are held hostage to the zone or 5 percent off the lowest published fare anyway. In a market characterized by high load factor, airlines won't be extremely giving, and any "tweaking of the zone" might well result in fares that will be outshone by other discount options.

On the other hand, zone fares help both parties plan ahead and know what they are spending at point of purchase, and help influence the decision of where meetings will be placed.

"I didn't even know that American had zone fares; it was a well-kept secret," said former MPI president Bill Boyd, president of Sunbelt Motivation and Travel Inc., an incentive company in Irving, Texas. "I guess they want to get the word out in a very big way, so they upgraded the program right about the time that they decided to market it."

Boyd, who has often relied on Delta's zone products, says that he likes them because they are easy to explain and thus easy to sell. The client always walks away from the table knowing what he or she is purchasing.

"With all the other carriers, you're dealing with two levels of faring in the case of international flights, paying a feeder to the gateway fare and the gateway to the international destination," he said.

Boyd said that while zone fares are "a very cyclical business, and products go in and out of fashion, I think Delta is the granddaddy of this cycle.