<B>InsideTrack</B>
<B>Judge Sides With American In Antitrust Case</B>
A federal judge late last month threw out an antitrust lawsuit brought against American Airlines parent AMR Corp. by the U.S. Department of Justice. The suit, filed two years ago, alleged that American engaged in predatory practices to bully several low-fare carriers out of its home market of Dallas/Ft. Worth and then raise fares above previous levels. Judge J. Thomas Marten of the U.S. District Court in Kansas, in granting AMR's request for a summary judgment, said the government's claims fail because "American did not price below an appropriate measure of cost; it, at most, matched the prices of its competitors. There is no dangerous probability, even assuming below-cost pricing, of recoupment of AA's supposed profits by means of supra-competitive pricing." Marten added that "there is no doubt that American may be a difficult, vigorous, even brutal competitor. But here, it engaged only in bare-knuckle, not brass-knuckle, competition." DOJ had no comment at press time. Vanguard Airlines, one of the parties allegedly forced out of the market, did. Citing its disappointment, the carrier said, "Aspects of this ruling render it nearly impossible for a plaintiff to bring a predatory pricing action."
<B><A NAME="2">With Fares Steady, Is Another Commission Cut Looming?</B>
The American Express Business Travel Monitor found typical business fares in 2001 to be unchanged in March for the fourth straight month, after a year that saw six broad business fare hikes. Meanwhile the Air Transport Association reported a dip of 2.5 percent for average fares in March. Southwest Airlines, which is not an ATA member and therefore does not contribute to ATA data, increased fares 5 percent in the first quarter, compared with an 11 percent increase in the fourth quarter and an 8 percent increase for full-year 2000. Some industry insiders do not expect any significant fare hikes this year, as carriers already are feeling the pinch of declining traffic in the face of economic weakening. However, carriers will have to find a way to recoup mounting labor costs, and rumors abound that a commission cut is the answer.
<B><A NAME="3">Speaking Of Commissions, Virgin Cuts But Stays Capless</B>
British carrier Virgin Atlantic last week shaved two points off commissions on economy class bookings, now at 8 percent. The airline, however, committed to at least another year of its uncapped commission policy and said it would maintain the 5 percent commission level on premium bookings. "We are proud to be the only major out there with a no-cap policy," said John Riordan, vice president of sales and marketing for North America.
<B><A NAME="4">Extended Stay Bucks The Downward Trend</B>
Contrary to other segments of the U.S. lodging industry, extended stay chains are seeing stronger-than-expected occupancies and revenue growth. Reviewing Marriott International's first quarter, for example, CIBC World Markets analyst Paul Keung said Residence Inn was one of the company's brands helped by buyers directing travelers away from full-service properties as a cost-saving measure. At Hilton Hotels Corp., the extended stay Homewood Suites brand scored a healthy 7.6 percent jump in RevPAR growth in the first quarter, more than double the increase for the core Hilton brand. Extended Stay America beat analysts' earnings projections.
<B><A NAME="5">Effect of Meetings Falloff To Deepen</B>
Lodging industry analysts said that group bookings for the remainder of the year look solid, but they remained wary of potentially higher cancellation rates if economic weakness continues. They cited Hilton Hotels Corp., whose convention business is expected to be weak nationwide for the rest of the year, with Chicago among the cities negatively affected as a result.
<B><A NAME="6">Carrier Presidents: Delta's Is In, CO's Is Out</B>
Delta Air Lines last week promoted executive vice president and chief marketing officer Fred Reid to president and COO. Reid, now second in command in a position vacant for two years, will handle most of the airline's internal management and help Delta CEO Leo Mullin with certain external matters. His responsibilities include day-to-day operations, revenue management, scheduling, strategic alliances and product development. Reid was president and COO of Lufthansa German Airlines before his three-year stint as Delta's top marketing executive. "We felt we needed to clarify the chain of command for decision making within the company," said Mullin. Meanwhile, Continental Airlines said president and COO Greg Brenneman will resign his post but stay on as an advisor until June 30. Brenneman, who along with CEO Gordon Bethune has been praised for masterminding the carrier's return to health, began at Continental in 1994 and was named president in 1996. He will return to TurnWorks, a private equity firm in Texas. Bethune expects Larry Kellner, executive vice president and CFO since 1995, to be named as Continental's next president at a board meeting next week.