<B>Low-Fare Air Usage Grows</B>
By Chris Davis
Faced with perpetually rising airfares and shrinking meeting budgets, corporate meeting buyers, attracted by expanded route networks and lower costs, are choosing low-fare carriers much more frequently than in the early 1990s.
According to a Meetings Monitor survey of 165 corporate meeting buyers, 64 percent of respondents have used low-cost airlines for meetings, compared with 49 percent who used such a carrier when polled in 1997 and only 29 percent who used one in 1994 (see chart, page 17).
Since then, low-fare airlines have expanded the destinations they serve and, in some cases, established standard meetings programs.
Despite moves by major carriers to hold their share of the meetings market, including the establishment of systemwide zone fares, the discount airlines are becoming more and more of a presence in corporate meeting programs.
Much of the credit for the rise of the low-fare carriers goes to Southwest Airlines, many planners said, as the airline now spans coast to coast and has become more of a factor in all corporate travel negotiations in recent years.
Steve Hodges, general manager of corporate travel for Mary Kay Inc. of Dallas, uses Southwest--for both internal meetings and events involving the cosmetics chain's independent sales force--primarily for the carrier's flexibility and its fare structure.
"Since they don't require a Saturday night stay and most of our meetings are in the middle of the week, we've booked them quite a bit more, especially with their increased nationwide presence," Hodges said.
While the major airlines' zone-fare meeting programs also don't require a Saturday night stay, Hodges said lower fares and basic contracts make the difference for him.
"Most of our meetings are very cost-conscious, and we'll choose lower fares," Hodges said. "Even with the majors' zone fares, Southwest is cheaper. Plus, I find their contracts less cumbersome and simpler."
The numbers documenting the low-fare carriers' rise didn't surprise Southwest officials. "It's partially due to a general trend toward corporations using low-fare carriers and partially due to the fact that our route network stretches from coast to coast," said Michelle Redford, manager of meetings and group marketing for Southwest, which achieved coast-to-coast status when it moved into the Northeast early last year (<I>BTN</I>, Nov. 16, 1998).
Southwest's eight-year-old meetings and groups department offers a 10 percent discount on most fares and a free ticket for every 40 booked, Redford said. Special fares and sales are the exceptions.
However, Southwest does not negotiate those discounted prices further, even when the corporate client has a volume-based contract, Redford said. "We really don't have a need to negotiate the group and meeting fares any further because one size fits most," Redford said. "That discount can lower the overall cost of the meeting substantially, given our low standard fares, and there's no Saturday stay requirement. To negotiate further eats away at the profit we hope to make."
Other buyers said meeting attendees are more willing to accept connecting service--much more common with low-cost carriers than majors--particularly if their corporations charge meeting costs back to their departments.
"We put a lot of people on Southwest, because of the fares and the paperwork reduction," said Bill Boyd, president and CEO of Dallas-based Sunbelt Motivation and Travel. "Connections are always a concern, but it's not such a big deal for corporate meetings. Even with indirect service, if the total time is within two hours of a nonstop and they can save a few hundred dollars, what's two hours?"
Boyd said lower airfares, though, were the predominant driver behind the increased number of meetings he's booked on these carriers. "Companies are questioning every expenditure these days," he said.
Other discount carriers also have seen increased corporate meeting bookings. AirTran Airways, for example, which operates several flights in and out of Atlanta and Orlando--two of the most frequented meetings destinations in the country--has seen dramatic growth in such bookings.
"We are absolutely seeing more of that type of business, particularly corporate group travel, which has doubled in the past two years," said Tad Hutcheson, director of marketing for AirTran. AirTran's meeting fares, Hutcheson said, often are booked under the terms of the corporate volume-based negotiated agreement for transient fares, which include an automatic upgrade to business class when a full-fare coach ticket is purchased.
While the carrier does not have a boilerplate group or meeting discount, Hutcheson said the discounts offered tend to fall between 10 percent and 30 percent off major carriers' group fares, depending on the destination.
"We're still small enough that we can customize deals for each group and meeting," Hutcheson said. "We don't have the big planes that the big carriers do, so we handle meetings on a case-by-case basis. It's difficult to predict pricing."
Also without a standardized meeting program is Frontier Airlines, though that carrier too has seen the number of corporate meeting and group bookings increase.
"Our level of discount is based on the flight's load factor, the origination and destination point, and the season," said Anne McCollum, director of reservations for Denver-based Frontier Airlines, which has no integrated meetings and group program. "Based on those criteria, the discounts range between 10 and 25 percent."
Frontier still handles requests for meeting and group deals on a case-by-case basis, McCollum said, though it may consider developing a standardized, comprehensive program if buyer demand dictated.
"It is a steady component of our revenue, but the demand is such that we can still customize for the buyer," McCollum said.
Frontier has been booking more meeting business, said director of communications Elise Eberwein, which she attributes to additional east-west flights on the carrier's route map and more airplanes in its fleet. "We're small enough that we can find a solution for each meeting, which offers some flexibility that zone fares, for example, can't.