<B>Sabena Seeks Corps.</B>
<I>Dangles Added Room In Biz, Broader Network</I>
By David Jonas
<I>Brussels</I> - The latest carrier to upgrade its business class, Sabena Airlines also is sporting a new alliance strategy and a new focus on retaining corporate clients.
Following the lead of many other airlines in the highly competitive transatlantic market, including the likes of British Airways, Continental, Delta and Virgin Atlantic, the Belgian carrier is increasing business class pitch--to 62 inches--and installing new seats with a 150 degree recline. The carrier hopes these enhancements--in line with but not exceeding the industry curve--combined with a strengthening market for business travel to its home base here, will propel it to a strong 2000 after a mixed bag in 1999.
Sabena officials said the new business class, now being installed on all long-haul aircraft with a completed rollout expected by June, is of particular importance for overnight flying and came in response to complaints from business passengers. A revised menu also is included in the business class improvement.
The new business cabin should help Sabena keep its hundreds of key accounts and perhaps draw in new ones, as the largest European airlines jockey for position in an ever-changing alliance landscape. Nevertheless, the carrier is worried about its business traffic, which increased a mere 1.7 percent in 1999, compared with an economy class increase of more than 17 percent, resulting in overall lower unit revenues. Officials blamed the discrepancy on the general cost-cutting trend by corporations to book their travelers in economy class, particularly on intra-European flights.
"There is a real concern that corporations that have a great need of transport between two cities--Washington and Brussels, for example--are opting to organize their own charter flights," said Paul Reutlinger, Sabena's president and CEO. "We need to make sure we still get a piece of that pie. We need to offer a convenient schedule, a good product by way of our new business class and more innovative and aggressive pricing to offer an attractive overall package. We have a good amount of corporate accounts now, but we need to grab more."
After measured growth and financial success during the past few years, Sabena took a hit last year, posting a net loss in excess of $50 million. Also, capacity increased more than passenger traffic, resulting in a lower network-wide load factor.
But 1999 also brought several positive developments, including a new nonstop route to Washington Dulles, an overall passenger total above 10 million for the first time and progress toward fleet harmonization.
Indeed, the last Boeing 747 left service in October and the remaining 737s will be phased out over the next two years. Sabena instead has opted for Airbus aircraft on both long- and short-haul routes. Patrick du Bois, the carrier's executive vice president and secretary general, said fleet commonality would bring efficiencies in many areas generating an annual savings near $10 million.
Moving forward, Reutlinger predicted 2000 will be a "difficult" year, citing the continued fuel problem and overcapacity across the Atlantic. In response, Sabena on March 1 instituted a 3 percent surcharge on Belgian routes and matched many others in raising fares 3 percent in transatlantic markets. Furthermore, capacity on those transatlantic routes likely will be slashed, though no official announcement has been made.
"It will be particularly challenging on the North Atlantic due to the fact that we have not yet been granted antitrust immunity with American Airlines," Reutlinger said. "We are now losing passengers across the Atlantic because Delta is no longer booking its customers with us."
Sabena and its full partner and part owner Swissair were forced to drastically change their alliance strategy when Delta last summer backed out of the Atlantic Excellence partnership. That alliance officially will dissolve on Aug. 5. In response, Swissair/Sabena quickly inked a codeshare agreement with American; a request for antitrust immunity is pending at the U.S. Department of Transportation.
Du Bois, who also serves as secretary general of the Swissair/Sabena Airline Management Partnership, said he expects an announcement on the antitrust immunity request in the coming months. "If approved," he said, "passengers would be offered a much larger network and more flexible pricing." Presumably, that also would mean an integrated approach to corporate sales, which already is well-entrenched in the AMP. It also would result in codeshares to more than 90 of American's beyond-gateway destinations, complementing current links on Boston, Chicago and Washington Dulles flights.
Meanwhile, hinging on how the alliance progresses, Sabena will adjust its U.S. gateway configuration to orient flights to American's hubs. For example, Atlanta operations could shift to Dallas while Cincinnati flights are re-routed.
An expected substitution is more flights into New York JFK following the termination of Delta code sharing there later this month. Furthermore, Sabena (and Swissair) will move JFK operations out of Delta's terminal and into terminal four.
In regard to the AMP, "sales integration is nearly complete as the corporate sales team now is led by a single person in each market," Du Bois said. In fact, Sabena is testing an even more comprehensive approach with corporations in Scandinavia where one salesperson represents Sabena, Swissair and all other Qualiflyer group members, and contracts are structured around overall Qualiflyer goals. The Qualiflyer group now consists of 11 airlines and will soon expand its joint sales program to other markets.
Sabena also is a likely participant in a new Internet portal, similar to the venture by Continental, Delta, Northwest and United. The carrier's e-commerce strategy also includes an expansion of electronic ticketing--such functionality will be brought immediately to the United States when the AA alliance is more clearly defined--and new options for corporations. "We want to work with corporations to give them easier access through e-commerce channels," Du Bois confirmed. "We have several corporate implants, for example, which means the traveler books directly on the Internet and the ticket is printed on a ticket printer at that corporation." However, negotiated corporate rates are not available via the Internet.
Though, du Bois said, "We do not expect to shift very drastically our business from our traditional travel agency sales to Internet sales, we will be progressive." Currently, only 1 percent of Sabena's sales are through e-commerce channels.
Meanwhile, Du Bois said the carrier is taking "a prudent approach" to the issue of travel agency commissions. "We want to remain a partner with the travel agencies," he said. "Though we have been reducing commissions in several markets, including the United States, Germany and others, we are generally not the leader in this area." He added that Sabena "does not intend to go as far as British Airways" in abolishing commissions altogether, but the best travel agency partners will begin to benefit less from commissions and more from incentive-based programs.
On the customer service front, Sabena, in cooperation with Swissair, is testing the FastTrack program, which identifies and pre-registers a traveler when he or she enters the airport. The traveler then picks up a boarding pass from a kiosk and proceeds to the gate, required only to show identification before boarding. The program, which now is testing in Zurich and soon will be brought to Brussels, significantly reduces a traveler's time in the airport and helps relieve congestion.