Smaller Carriers' New Programs Lure Buyers

<B>Smaller Carriers' New Programs Lure Buyers</B>
<I>Low-Fare Airlines: Part One In A Three-Part Series</I>

By David Jonas

As business fares continue to move upward, the role of low-fare carriers is greater than ever for corporations trying to keep air costs in check. The enormous success and rapid growth of Southwest Airlines haveproven to its low-fare counterparts that there is room in the market for alternatives to the biggest carriers--given a sound business plan and careful planning--and that the majors will be compelled to react to them in certain markets.

Some of these carriers have been active in the corporate market by developing programs for buyers and business travelers, notably AirTran in Atlanta and Frontier in Denver. JetBlue in New York, Sun Country in Minneapolis and American Trans Air in Chicago also have recently begun marketing to the managed corporate sector.

"Business travel is critical to all these airlines. In order to succeed, you must have briefcases on the plane," said Terry Trippler, airline expert at Onetravel.com. "Some of these airlines knew this from the beginning, while others had to learn it the hard way. Most of them know it now."

That lesson learned translates to viable corporate programs available for buyers in hub markets looking for either occasional cost relief from higher-price carriers or as security against monopolistic tendencies. While these programs usually are employed either to fill in the gaps or to uncover quick savings, most corporations still must deal with major airlines, particularly in hub cities. For the most part, those majors acknowledge the presence and role of their smaller competitors, recognizing that they cannot have every corporate account, even at a fortress hub.

With industrywide traffic and load factors at record levels, there is enough business for everyone and buyers can seek out savings. And many low-fare carriers are working to entice them.

On the East Coast, AirTran Airways is establishing itself as a player in the corporate market. More than 1,800 corporations, many in Delta-dominated Atlanta--which also is AirTran's main hub--have signed up for the carrier's Corporate Travel Program. That number has increased more than twofold from last spring (BTN, July 5, 1999).

"We have five salespeople focusing a lot on small, medium and large corporations. What we are taking to the marketplace is our story based on our Corporate Travel Program," said Bill Howard, AirTran director of sales.

Any corporation with at least five travelers and at least 50 annual segments on AirTran is eligible for the program, which gives business travelers an upgrade to business class when purchasing a full-fare unrestricted Y or B fare. "For less than a center coach seat on a competitor, these travelers will be in our business class," Howard said.

Also, regardless of the fare type purchased, travelers from participating companies always benefit from advanced seat assignments and never incur change fees.

"I tell many corporate travel managers that the nice thing about this is that it is one of the best corporate discounts they will get without negotiating," Howard said. "When it saves you money and provides convenience for travelers, it is a no-brainer."

AirTran plans to bring the Corporate Travel Program to its Web site, airtran.com, but no timetable has been set. However, some corporations do book through the Web site and receive a monthly bill for all purchases. Howard said such programs have not been formalized and are not yet widely available.

While a majority of AirTran's traffic is still leisure, Howard said, "we are seeing a lot more suits on the airline." The changing mix is due in part to the carrier's $25 upgrade program, which has generated double-digit growth in business class traffic.

Meanwhile, AirTran recently moved into five new gates in the newest concourse at Orlando International Airport. The carrier also trumpets its same concourse connections in its Atlanta hub, where "the longest hike is literally two minutes between any of the 22 gates, without riding the tram or any of that nonsense."

Also, business travelers now can download AirTran's schedules directly to their handheld devices.

Out west, more than 4,800 corporations have established accounts with Frontier Airlines, many as insurance against United's dominance. While Frontier acknowledged that many accounts are not active in a given month, most are, including corporations spending as much as $2 million a year with the carrier (BTN, July 31).

Frontier also offers a small business program that provides enrollees 5 percent savings on flown revenue.

Frontier and AirTran are the two low-fare carriers to gain the most exposure with corporations, but several others have recently stepped up efforts in the market. New York-based start-up JetBlue, for example, is targeting corporate travel as an essential portion of its business.

"While it is important to realize that we are discounted for everybody and don't offer corporate fares, we will do some things with the super large corporations that have in the range of 3,000 segments a year in any of our markets," said Alex Wilcox, director of business development. "For example, we are running a pilot program with HSBC Bank to give them direct access to our inventory and get around onerous GDS fees, which can be as high as 10 percent of our fares. We will be trying out that sort of thing with other corporations moving forward."

Later this month, JetBlue will roll out SkyAgent, a system enabling agencies to book directly online, thereby accessing sale fares not available in the GDS and, again, avoiding GDS fees. "We still guarantee agents a commission, which is 5 percent across the board," Wilcox said. "Direct access is the real key, especially since it offers our full inventory, including the last five seats in any bucket not normally available in the GDS."

Appealing to the business traveler, JetBlue offers completely ticketless travel and assigned leather seating, LiveTV 24-channel satellite programming and multiple frequencies on most routes. That product line, combined with extremely low fares, has resulted in a business mix of more than 65 percent on routes between upstate New York and New York JFK.

"We already have a lot of corporate clients," said JetBlue chief and industry veteran David Neeleman. "If you look at Rochester, for example, part of the reason we launched was Kodak, Xerox and Bausch & Lomb."

Though American Trans Air has been around for a long time, its focus on the Chicago corporate market is relatively new. "The airline has become very interested in developing corporate programs, including complimentary tickets for those companies with significant traffic on any of their routes," said John Smith, president of Tower Travel Management in Oakbrook Terrace, Ill. "It just does not have the resources to call on many corporations, so they have been relying on agencies."

The carrier also has made an effort to make itself more visible to buyers. For example, American Trans Air made its first appearance at the National Business Travel Association annual conference in Los Angeles this summer.

In Dallas, Legend Airlines made headlines in its legal battle against American Airlines. Though it is not a traditional low-fare carrier, Legend's first class service still is priced below comparable fare levels previously in the market. Now, more than six months after launching service from Love Field, the carrier is making inroads with some corporations by marketing its value message.

"We have been extremely aggressive with corporate sales and offer discounts reflecting the volume driven to Legend," said Lisa Bauer, the carrier's vice president of marketing and customer service, adding that about 30 corporations ranging in size from $20,000 to the multimillions already have signed deals. "We are serving three business destinations--New York, Los Angeles and Washington--so we are focusing on getting new accounts in those cities."

Legend already has begun offering net fare contracts and guaranteed fares in addition to traditional percentage discounts. It also is developing direct corporate booking and pre-purchase programs. A mileage incentive program for corporate accounts was launched last month.

Legend's service is a convenient draw for many corporate travelers. Flights from Love Field are much closer than Dallas/Ft. Worth and inflight leather seating with LiveTV broadcasting has been received well.

Sun Country is another classic example of a low-fare carrier answering the cry for lower fares in a dominated hub market. Its One Fare program has attracted 1,000 corporations, primarily in its home market of Minneapolis.

The program provides corporations with a set one-way fare of $140 on any domestic route the carrier flies. No advanced booking is necessary, though reservations must be made through the Sun Country Web site. A single fare code is used to track purchases.

In return, the corporation must commit to 40 one-way or 20 roundtrip tickets within 12 months of signing. Leisure travel by the enrolled company's employees also counts toward that commitment.

"One Fare is designed around the traveling needs of small businesses, but also some larger firms," said a Sun Country spokesperson, adding that some larger corporations have opted for a similar but less flexible Private Fare program. Private Fare generally is facilitated through dedicated travel agencies and is more of a share for a discounted fare arrangement.

Sun Country's passengers benefit from a dedicated One Fare checkin at Minneapolis/St. Paul as well as a new loyalty program launched in August.

"We use Sun Country because with their corporate program, we can ticket our travelers at the last minute," said Esther Abrahmson, executive assistant at St. Paul-based Syntegra USA, a division of British Telecom. "And if they have a special sale fare in any given market lower than the One Fare, we'll get that sale fare. Of course, we have to use other airlines if we need a more convenient schedule, notably Northwest, but Sun Country really has saved us a lot of money."

According to Abrahmson, Sun Country now provides Syntegra with a $130 set one-way fare used by 140 travelers from Minneapolis/St. Paul and several more based in Seattle.

For its part, Kansas City-based Vanguard Airlines offers a bulk purchase program whereby 10 advanced purchase tickets on any given route results in a 10 percent discount. Though it is targeted at individual business travelers, the carrier said it will work with corporations to set up the program. Other perks include full refundability, no change fees, guaranteed and preferred seating and express checkin.

<I>Look for Part II: Low-Fare Carrier Impact in the next issue of</I> Business Travel News.