<B>InsideTrack</B>
<B>American To Battle Northeast Shuttles</B>
Long known for its desire to get a piece of the lucrative, high-load business market in the Northeast corridor, American Airlines last week announced plans to launch on Nov. 1 six daily roundtrip flights between Reagan Washington National Airport and Boston Logan. The service, which will compete head to head with entrenched incumbents Delta Shuttle and US Airways Shuttle, will use 87-seat Fokker 100 jets in a two-class configuration. American said the service will complement increasing regional operations of American Eagle and Business Express from Boston to cities throughout New England and eastern Canada.
"American is trying to present more of a complete picture, especially in Boston, where there is a fair degree of competition among the biggest carriers," said John Heilner, a consultant with Management Alternatives/MSIG in Princeton, N.J. "Not to mention that the yields on that route are quite high." Indeed, American's strengths in Boston also include flights to Chicago, Dallas, Los Angeles and several international destinations. "It's becoming a small hub of sorts for them and they cannot be vulnerable to a top destination like Washington," said Rolfe Shellenberger, senior consultant for Rochester, Wis.-based Runzheimer International. "They probably are trying to cement a position in case the United/US Airways deal goes through and it also is a better way to use the slots they have at National."
American, through marketing and Sabre technology agreements, was hoping to join US Airways in the shuttle market in some capacity, but United's proposal to buy US Airways effectively ended those efforts.
"It certainly is raining on someone's parade," said one corporate travel manager. "When you think of flying between those cities, who would you normally think of? US Airways." While it remains to be seen if American will successfully draw away corporate clients loyal to the two current Northeast shuttle operators, it certainly raises the possibility of a heated three-way competition if the carrier tries to leverage other parts of its network. "They absolutely will look to steal some accounts," Shellenberger said. "After all, any corporate traveler who has American frequent flyer miles will want to use American on that route rather than Delta or US Airways."
<B>EC To Unveil Passenger Rights Plan</B>
The European Commission is set to reveal full details later this month of its plan to improve passenger rights within the European Union. The plan will consist of a mixture of legislation and a voluntary code by airlines that fly in the region, including those of non-EU origin. The most controversial element of the proposed legislation will enable delayed passengers to continue their journeys under good conditions by giving them the right either to reimbursement or an alternative flight at the earliest opportunity. Airlines are resisting this fiercely, claiming they will be penalized even though the majority of delays are attributable to air traffic control, airport congestion and weather. Among other proposed legislation is a ban on fare increases after tickets are booked plus an insistence on clarity and standardization of airline contracts. The voluntary airline code will be broadly similar to that introduced in the U.S. last December and will be finalized by the European Civil Aviation Conference next April. European transport commissioner Loyola de Palacio is scheduled to bring her proposals before the Council of Ministers for final approval shortly before Christmas.
<B>HOTEL ROOM RATES, REVENUE JUMP</B>
Through July, U.S. average room rates increased 4.5 percent over the prior year and room revenue jumped 8.6 percent. The supply of rooms, meanwhile, grew 3.2 percent. For travel buyers, this Smith Travel Research data won't be good news. The picture they present suggests buyers will face a tough negotiating stance from hotels as the RFP season for 2001 rates begins in earnest this week. Occupancy rates in the period held fairly constant at 64.7 percent. Not surprisingly, average room rates went up most steeply in the New England region (8.5 percent), which includes New York and Boston. Tied for second place in average room rate increases were the Middle Atlantic and Pacific regions, which experienced a 6.8 percent bump.
<B>Hertz Blames UAL, Pricing For Earnings Miss</B>
Hertz Corp. late last week announced it would miss analysts' forecasts for the third and fourth quarters of 2000. The company blamed competitive conditions in the car rental industry, caused by what it called an excess of fleet supply and its own decision to raise prices, and airport service disruptions caused by United Airlines' labor dispute. The company expects earnings of $1.30 and $0.51 per share in the third and fourth quarters, respectively, short of analysts' expected $1.43 and $0.63. The company anticipates 2000 earnings of $3.30 per share--analysts expected $3.49 per share--and said it expects "low, single-digit" income growth in 2001.