Woodside Travel Trust Airs Competitiveness Issues

<B> Woodside Travel Trust Airs Competitiveness Issues</B>
<I>Reporter's Notebook</I>

By Barbara Cook


In the past year, since the U.S. Department of Transportation first proposed its controversial competition policy guidelines, the "most egregious" anticompetitive acts by major airlines seem to have abated and limited new carrier entry has begun, DOT deputy assistant secretary for aviation and international affairs Pat Murphy told delegates at the Woodside Travel Trust Corporate Symposium held last month in Arlington, Va.

The new entry, by National Airlines, AccessAir and New Air, represents "what will hopefully be a new wave" of startups, Murphy said.

On the negative side, Murphy said that a trend toward consolidation through domestic airline alliances has drawn the Transportation Department's attention. He said the prospects are "very real" for continued efforts at carrier consolidation.

Also during the past year, the traveling public and members of Congress have voiced concern over the quality of airline service, Murphy said, adding that the airlines haven't responded to these concerns with marketplace initiatives. Consequently, DOT is working actively to complete its guidelines, which should be issued "shortly" after a congressionally mandated report on the status of airline deregulation is completed by the Transportation Research Board, he said. That TRB report is expected to be released this spring.

Murphy also listed other steps the Transportation Department is taking to ensure continued competition in the airline industry, including a review of airport practices that could inhibit new entry.

DOT is "painfully aware" of the so-called fortress hub phenomenon, Murphy said. The airport practices study and any recommendations that are developed in response to the findings will be issued later this year.

In response to a question, Murphy said Minneapolis-St. Paul International Airport "is right up there at the top of the list" with single carrier dominance and high fares. He said DOT has been working with Sun Country Airlines--which is planning to transition from a charter to a scheduled carrier--to obtain gates at Minneapolis-St. Paul. He also noted that the Transportation Department has worked to win a new gate for United at the airport, adding that he expects United will soon announce new service from Minneapolis.

DOT's CRS rules--which were recently extended through March 2000--remain under review, Murphy said. Officials are looking at issues such as whether one system's hardware should be used to access other systems, productivity pricing, booking fees, access to corporate discounts, display bias and Internet practices. Regarding the future of computer reservation system companies, Murphy noted, "These systems seem to be evolving to multiple owners. I hope ownership becomes so diverse that it eliminates anticompetitive issues."

<center><b>* * * * *</b></center>

Attempting to ensure consumer access to complete information on airline fares can have unexpected consequences, DOT special counsel Steven Okun told symposium delegates.

Referring to Sen. John McCain's (R-Ariz.) proposed passenger rights bill, Okun said that, strictly interpreted, the measure could have the unintended result of banning Internet airfares. Language in the bill calls for travelers to have full access to all fares that an airline offers. The question is, how would this apply to people without Internet access? It likely would require airlines and travel agents to offer the special Internet-only airfares over the telephone as well, possibly causing the airlines to drop the Internet specials. DOT and congressional staff presently are "struggling to find a middle ground" solution, Okun said.

<center><b>* * * * *</b></center>

PaineWebber managing director and airline analyst Sam Buttrick predicted that airline profits will dip by 10 percent this year due to capacity growth that will hit 5.3 percent, up from the usual 2 percent; rising labor costs as employee groups expect to share in healthy carrier revenues; and pressure in international markets, especially in the Asia-Pacific and Latin American markets.

Buttrick described carrier alliances in general as "long on promises and short on product." On the international front, they do have value, he said, but still have been oversold. Domestically, consumer benefits of alliances are "more debatable," he said.

Referring to the keen interest in Congress for carriers to be more competitive domestically, Buttrick noted that the response of the U.S. airline industry has been to form alliances, though "I don't think that's exactly what the folks in town here had in mind."

For the future, Buttrick said he expects that the airline industry will attempt channel-based price differentiation, with fares set according to the distribution method. Delta attempted a "clunky" mechanism with its recent experiment using a surcharge for non-Internet sales, he said.

The Internet is here to stay as a distribution tool, Buttrick said, adding that, "Every travel-related business needs to find a way to befriend the Internet."

Within the next five years, the Internet will account for 20 to 25 percent of airline bookings, Buttrick predicted.

<center><b>* * * * *</b></center>

Hotel rates won't rise as much in 1999 as they did in 1998, despite earlier indications of a softening of lodging markets this year, according to a prediction made during an industry vendor panel.

Fred Miller, vice president of intermediary sales and marketing for Marriott International, noted that in key downtown locations without substantial new capacity, "You will see prices continue to rise." In suburban and limited service segment markets, however, there likely will be a flattening out of prices.

In a discussion of the relationship among the travel management company, the customer and the vendor, US Airways vice president of sales Steven Tracas predicted that this triad arrangement won't disappear to be reborn as a client-vendor relationship only, noting "this is difficult work" that allows the travel management company to demonstrate its value.

Miller added that he is witnessing more involvement in hotel negotiations from travel management firms than in past years.

From the client's perspective, Internet-based travel services free the travel agent to provide value-added services, such as data management, and to handle complicated itineraries, W. Michael Craighead, manager of travel operations and office services for DaimlerChrysler Corp., stated during a panel devoted to negotiating the Internet. "There needs to be a level of expertise that agencies could be more focused in providing," Craighead said, which "raises the bar of the service they provide."

Craighead said some travelers will never be comfortable with the Internet and always will need personal service.

From a corporate perspective, the Internet is a good way to "squeeze" costs out of travel programs, he stated.

Arthur Dahl, president and chief operating officer of Woodside affiliate Northwestern Travel Management, noted that one problem he finds with the Internet today is pressure from companies that want their travelers to use the Internet "because they think they can find more fares," without recognizing that this eliminates the company's ability to capture much needed travel data.

<center><b>* * * * *</b></center>

Following its annual meeting, Woodside Travel Trust appointed Patty Corbino senior vice president of global business development. Corbino will head a new WTT global consolidation division that will concentrate on better vendor data consolidation among partner agencies.

During her first 60 days, Corbino said, she will meet with global partners around the world, and her 120-day plan includes working on presentations WTT will make to new and existing global customers.

Prior to joining Bethesda, Md.-based Woodside, Corbino was vice president of strategic initiatives at Travel & Transport Inc. in Omaha, Neb.