A former American Airlines official says issues within the airline industry will change the face of business travel, with travelers facing full flights and few, if any, amenities.
“Airplanes are going to be full, hotels are going to be full and the costs of business travel will be increasing, too,” said Debbie Reynolds, a retired American Airlines official.
“The impacts of headline issues to the business traveler are well known to the industry,” Reynolds said April 11 at the Alaska Business Travelers Association meeting in Anchorage.
Reynolds highlighted several issues that will affect business travel, including airline security, the global distribution system, and airline, hotel and rental car taxes, as well as potential airline mergers.
“We are not real sure how to keep our airline security at the level that it needs to be,” Reynolds said. “But I bet everyone in this room knows what 3-1-1 means.” Reynolds was referring to travel security measures that regulate the amount of liquids passengers can bring on a plane — 3-ounce containers that must fit into one zip-lock bag. The retired airline official projected that increased security by the Transportation Security Administration will lead to even more items that must be screened, making it take longer to board flights.
“We need to be more proactive to be sure exactly what we can carry on,” Reynolds said.
Bankruptcies and mergers changing the landscape
Many airlines are scrutinizing costs while reorganizing during bankruptcy. One of the biggest costs examined last year was the ownership of the global distribution systems, which are used for airline reservations and booking.
“The GDS marketplace has changed, and many are no longer owned by the airlines,” she said. “The airlines are asking, ÔIs GDS viable for the future?'”
Northwest Airlines, for example, started charging airline passengers for the use of the GDS systems in hopes of collecting $70 million a year in revenue to offset its fees. Northwest pays nearly $180 million yearly in GDS fees, according to M-travel.com, an online travel industry publication.
“In 2006 business travel came back,” Reynolds said. Many airlines say their domestic travel increased and created an 18 to 20 percent shift in the market. There was less supply and more demand for seats.”
While many airlines are reorganizing after filing bankruptcy, the talk of mergers by the larger airlines to reduce duplicated costs will also affect travel, according to Reynolds.
“What you will see is a push by the majors for more international travel, which will force them into using smaller regional jets and commuter carriers to feed their traffic into the bigger hubs,” Reynolds said. Reynolds said that the demand imbalance would be good for the commuter airlines, which will also see an increase in passenger loads.
“This will add to more commuter growth in all of the U.S.,” Reynolds said.
While the Alaska market differs from that of the rest of the nation, Era Aviation concurs with the forecasts and is prepared for more regional passengers by adjusting its aircraft type.
“In existing markets, Era will adjust the available seats as necessary to meet the demand in those markets,” said Mike LeNorman, marketing director for Era Aviation.
Hotels and cars to cost more
After the terrorist attacks of Sept. 11, 2001, hotels put rooms on Web sites, such as Travelocity and others, creating dynamic pricing, which helped hotels rebound after a drop in travel nationwide. Added capacity at hotels will also encourage management to increase room prices, which will increase costs to businesses, according to Reynolds.
Another factor that impacts the business traveler is the price of a rental car and the amount of tax paid as part of the rental.
These taxes have not escaped the notice of Alaska businesses.
“The local cities and governments are placing these taxes at such a level that if you don't have a contract in place, this could affect a company's bottom line,” said Sandy Harding, president of the Alaska Business Travel Association.
Along with rising prices for hotels and cars, fuel cost increases will eventually change budgets and business travel nationwide, thus placing more emphasis on technology to help business travelers book better deals while on the move.
“The younger generation will dictate what happens in the business world, “Reynolds added. “To them, the use of technology is not a privilege or a gimmick, but a means of communication. Remember this generation has never lived without computers or cell phones.”
More costs will mean less service
The biggest disappointment to business travel besides increased costs will be a decrease in service, Reynolds said.
“One airline executive told me that their airline was not prepared for flights with more than a 74 percent load factor,” Reynolds said. “Soon after that, the very same airline experienced a load factor of 82 percent, and in some cases now load factors are at 100 percent.”
Reynolds said reduced staff at airlines due to cost-cutting has meant a work force that is unable to handle increased needs.
“You're going to see less service and no more free items onboard flights,” she predicted. “This is going to force business travelers to look at other means of doing business and how they travel.”
Rob Stapleton can be reached at
rob.stapleton@alaskajournal.com.
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