Airlines Offering Fare Cuts to Lure Back Business Travelers

Recognizing the importance of business travelers to their bottom lines, two of the nation's biggest airlines introduced discounts on corporate travel at a time when planes are flying half empty nationwide.

But the much-expected bargain-basement sale for leisure travelers has yet to happen, a sure sign that airlines are more interested in high-paying corporate clients and the revenues they generate.

UAL Corp.'s United and Continental Airlines Inc. are offering reduced fares that are likely benefit mostly small- and medium-sized businesses as opposed to large corporations, which already were given even steeper discounts through individually negotiated contracts.

The new fares, which are similar to existing offerings from Northwest Airlines Corp. and Delta Air Lines Inc., do not require a Saturday night stay, a condition often attached to cheaper leisure fares.

The discounts, which are available for travel through Dec. 31, were adopted Tuesday by Houston-based Continental after Chicago-based United announced its fare change late Monday. Other carriers are expected to follow.

After several weeks of intense cost-cutting measures that included trimming schedules by 20 percent and laying off more than 90,000 employees, airlines now seem focused on increasing revenues.

The combination of low consumer confidence in air travel after last month's terrorist attacks and the likelihood of an economic recession has resulted in multibillion-dollar losses for the industry this year.

Analysts say a return to normal air travel levels could be at least a year away. In the meantime, carriers appear most concerned with luring back higher-paying business travelers first, experts said.

"They need revenues more than they need passengers," said Michael Boyd of The Boyd Group, a Denver, Colo.-based aviation consulting company.

While fewer than 10 percent of passengers purchase business fares, those sales typically make up between 50 and 70 percent of industrywide revenues.

Few Fare Cuts for Leisure Travelers

For leisure travelers, few significant fare cuts have been announced since the Sept. 11 airborne terrorist attacks that plunged the struggling airline industry into an even deeper financial hole.

Hal Rosenbluth, chairman of Rosenbluth International, a corporate travel-management firm based in Philadelphia, said his clients are buying one-third fewer airline tickets than a year ago and that the sputtering economy has played a much larger role in that decline than the events of Sept. 11.

Companies have been carefully evaluating the value of each trip and sometimes eschewing travel in favor of videoconferencing for the past six months, he said.

"I've always felt 15 percent of all travel is unnecessary," he said. "There are other ways of communicating."

Many carriers extended previous autumn discounts for leisure travelers, but analysts said budget-minded consumers could wait a long time before the industry announces across-the-board fare cuts.

"We have not had the everything-must-go sale yet that we're expecting," said Terry Trippler, who tracks airline fares for

Northwest, based in Eagan, Minn., on Tuesday launched a fare sale for its frequent fliers, offering roundtrip airfares within the United States for as low as $128 plus 5,000 miles. For travelers wanting to visit Europe, trans-Atlantic airfares are as low as $275 plus 5,000 miles and airfares to Asia are as low as $399 plus 5,000 miles.

American Airlines, a unit of Fort Worth, Texas-based AMR Corp., said Tuesday that customers enrolled in the company's AADVANTAGE program would earn double the amount of miles for travel between Oct. 2 and Nov. 15.

But industry watchers said the average cost of flying between certain destinations has actually risen as lower-fare seats were eliminated when carriers cut capacity by 20 percent after the attacks.

Even with the capacity reductions, about 50 percent of seats on domestic flights remain unfilled, according to the Air Transport Association, an industry trade group. Before the reductions, analysts said carriers needed to fill about 65 percent of their seats just to break even.

"If passenger travel remains depressed at current levels -- off 40 percent to 50 percent -- it is likely that there will have to be additional cuts in capacity," Merrill Lynch analyst Michael Linenberg said.

Linenberg said he expects the industry to lose $6.5 billion 2001 and $3.5 billion in 2002.

United and Continental are offering discounts of up to 50 percent for business travelers who purchase tickets 21 days in advance, and 25 percent for those who book 10 days in advance, compared with regular unrestricted fares.

Reuters and the Associated Press contributed to this report.