InsideTrack - 2003-02-10

Airlines: Chapter 11 Update

With two major carriers in bankruptcy and others desperately trying to avoid it, the next few months are critical for the airline industry. Bankrupt United Airlines' plan for transformation includes a more efficient mainline product that "meets the needs of the core business traveler, while maintaining the lowest cost among network carriers," a new lower-cost but as of yet undefined subsidiary, expansion of regional jet flights through United Express and deeper cooperation with alliance partners. To expand domestic reach, United said it needs "to implement the same kind of joint venture and revenue share arrangements that have allowed it to generate more revenue from international relationships." The current United-US Airways codeshare partnership does not call for revenue sharing. United said a separate reorganization plan targeting emergence from bankruptcy will be finalized at a later date. US Airways said it remains on schedule to emerge from Chapter 11 by the end of next month. A confirmation hearing on the company's reorganization plan is scheduled for mid-March. American Airlines last week asked labor unions to sacrifice $1.8 billion through permanent wage reductions and work rule changes. "Unfortunately, we have little other choice," said CEO Don Carty and president Gerard Arpey in a letter to labor leaders. "What we do have is an opportunity no longer available to our counterparts at United and US Airways: the chance to work together to find mutually acceptable solutions to our financial crisis in order to avoid the uncertainty of courts and creditors determining our fate."



Amex Lobbying Against Proposed ARC Rule Changes

American Express last week told customers it objected to a proposal by ARC that would reduce from a week to just 24 to 48 hours the time allotted for reporting and voiding airline ticket sales (BTN, Dec. 9, 2002). "To service customers properly, the travel industry relies on this one-week window to correct inadvertent ticketing errors and to take advantage of the numerous changes that result in lower fares for our customers," said Mike Mulvagh, American Express Corporate Services vice president of communications and industry affairs, in a Jan. 30 letter to customers. Mulvagh said the proposed rules would increase Amex's processing costs, nonrefundable "spoilage rates" and costs resulting from travel counselors' inability to correct ticketing errors. Rosenbluth International and TQ3 Maritz Travel Solutions in December downplayed the ramifications while Carlson Wagonlit Travel suggested they could impact some corporate clients. WorldTravel BTI said, "The new policy would reduce the travel agencies' ability to assist the traveler in securing the lower cost fare, but would immediately generate revenue for the airlines in higher ticket costs and change fees. As a remedy, we do not feel that shortening the void window alone will alleviate fraud."



Navigant Sees 'Some Impact' From Online Agencies

Navigant International chairman and CEO Ed Adams last week acknowledged "some impact" from the entry of Expedia and Orbitz into the business travel sector (BTN, July 29, 2002), though only among clients that are not or are only lightly managing travel. According to Adams, "I know we've lost some accounts" among that group, which he said makes up 5 percent of Navigant's business. In response, Adams said, "This year we will roll out a product for corporate accounts that want a self-service, no-touch solution, probably in the second quarter."



Feds Seek End-To-End Solution

As part of the federal government's e-travel initiative, the General Services Administration plans this week to send out a request for proposals for an "end-to-end" travel management solution. Vendors then will have 30 days to bid. By mid-2003, GSA plans to select a provider or alliance of suppliers, with a year-end implementation target. GSA is seeking to integrate pre-trip authorization, online booking, expense reporting and financial systems.



Cendant Slows Buying Spree

Cendant Corp. is halting its run as one of the industry's most acquisitive companies. "The pipeline is relatively bare," said chairman, president and CEO Henry Silverman last week in reporting fourth-quarter net income of $247 million.



CEO Barton On The Move From Expedia

Expedia president and CEO Richard Barton last week announced plans to leave the Bellevue, Wash.-based company at the end of next month to travel with his family. An Expedia founder, Barton will be replaced by another longtime executive, president of Expedia North America Erik Blachford. Blachford said his current duties would be sorted out over the next 30 to 60 days. Barton will retain a seat on the board of USA Interactive, Expedia's majority owner.