Low-Fare Carriers Make Strides

<B> Low-Fare Carriers Make Strides</B>

By David Jonas

Low-fare carriers have shown strong improvement and have bright prospects for their future dealings with business travel buyers, according to buyers and analysts alike, even though the four low-fare carriers on this year's list once again were clustered together at the bottom of BTN's Annual Airline Survey.

Even with the low overall ranking, Southwest again took top honors in the overall price value category, as a whole and among travel agents. On the corporate side, American made it a dead heat. Southwest also beat the industry average in complaint/problem resolution. Also as expected, the carrier received the lowest score for its flexibility in negotiating on services and amenities, and well below the industry average in availability of special services for VIP travelers. As a result, Southwest slid two spots to finish eleventh overall.

"For the most part, these carriers have had a tough road in front of them," said John Heilner, consultant for Management Alternatives in Princeton, N.J. "But today there is more of a realization that discount carriers are essential for keeping the mega carriers in line. The effect of not having that kind of competition is becoming clear to people." In fact, three low-fare carriers placed in the top five in overall price value.

Frontier and American Trans Air in particular experienced substantial improvement in their overall scores. Frontier, on the corporate side, easily beat the industry average in flexibility in negotiating transient pricing, empowerment of sales reps and overall price value. Heilner said, "The sales force, starting at the top, does a very good job and has made them into more of a serious player in the minds of many travel managers."

Andrew Menkes, vice president of global travel management at Republic National Bank in New York and a member of Frontier's new corporate advisory board, said the Denver-based carrier has been "more proactive, understands its place in the airline hierarchy and is excellent in communicating any changes or new information."

Tom Allee, Frontier's director of sales and marketing programs, said the airline has 31 Fortune 500 companies under contract and is working diligently to appeal to the corporate market.

Meanwhile, Frontier on Nov. 1 will debut a meetings and group desk to address low scores in flexibility of negotiating group travel.

Travel agents ranked Frontier lowest, more than 20 percent below the average overall score. "We don't have a large sales force to continually call on the agencies," Allee said. "And we do not participate in the override-commission program, so that may be a negative in the minds of the agencies."

Yet, the fact that Frontier received such high marks from travel managers in comparison to last year but still placed tenth overall suggests that low-fare carriers simply don't have the size and scope to offer corporations the agreements and coverage they want. Indianapolis-based American Trans Air further underscores that fact. Aside from Frontier, it posted the healthiest overall score increase from last year, yet remains last on the list.

While 63.5 percent of all respondents use Southwest, the three other low-fare carriers on the list all had usage numbers below 30 percent.

Rob Callahan, travel services manager at SBC Communications in San Ramon, Calif., added that endurance also is an issue. "Corporations still may be hesitant to use low-fare carriers because they have been burned in the past by the instability of come-and-go carriers."

Other factors limiting wide acceptance by buyers include reliability and productivity issues. "With the majors, a traveler always has alternatives," one buyer noted. "But with these smaller airlines, can you determine the cost of a missed business appointment if your flight is cancelled and none others are available?"

However, low-fare carriers are trying hard to enter the fray. "Although these carriers are resource poor and can't field an army of salespeople, in the past year they have been more active in the marketplace and are appearing more often in major bidding," said Michael Boult, Rosenbluth's vice president of supplier relations.

One such active low-fare carrier, and a newcomer to BTN's Annual Airline Survey, is Atlanta-based AirTran. The carrier has added routes and made strides in the corporate market, with the number of corporate accounts now close to 900. With travel agents, it tied with Southwest for the highest overall score among low-fare carriers, and placed second among all the airlines in overall price value.

"The big carriers still are in denial about the low-cost airlines and if some of them came into the larger airports, it would be quite a buyer's market," said Fred Fischer, manager of corporate travel services for Boston-based John Hancock Mutual Life Insurance. However, he noted that cultural prejudices and less expansive frequent flyer programs still prevent business travelers from flocking to the low-fare carriers. "It is still word of mouth with those guys."

Phil Dunphy, travel manager at Pfizer in New York, added that while it does not make much sense for his company to focus on low-cost carriers, since those deals would not impact his budget, he recognizes their efforts. "All these airlines are starting to understand that corporations are driving business more so than before," he said. "And even if they're still just waterboys, at least they're now in the game.