May 10, 2001 -- And now for something completely different: Total insanity on fares and still more evidence that airlines are clueless about the true nature of business travel.
First, two tales from the fare front.
I'm off to Chicago this weekend to attend a wedding. Even though I was inexplicably lazy and waited until last week to book, I found a $182 roundtrip nonstop to O'Hare from my hometown airport of Stewart International in Newburgh, New York. Coincidentally, a client called this morning and asked if I could do a day trip to Chicago the Monday after next and attend an important presentation. I checked, but the Stewart-O'Hare roundtrip that day is $1,268. At that price, my client said, he'd rather just conference me in on the phone.
Last month, I helped 11 people take a quick holiday in Italy. In January, they committed to a special group fare from New York to Rome. But just before those tickets were issued, the airline called to say its published fare had dropped to $467.26 roundtrip, lower than the previously quoted group rate. Naturally, the group opted for the lower, published fare and purchased 11 coach tickets for a total of $5,139.86. I'll let you check the price of a New York-Rome roundtrip in business class, but don't be surprised when you're quoted $5,463.56.
Now comes the clueless airline part. Why was I able to score a weekend jaunt to Chicago for about one-seventh the price of a business trip? And why, you may be wondering, were 11 adults able to fly to Rome on holiday for less than the price of a single business-class ticket? The answer is simple: Business travel is plummeting, so the airlines are frantically slashing the price of leisure travel.
That concept is mind-numbingly absurd, so I'd better repeat it. Faced with a sharp and sudden decline in the rapaciously priced business-travel tickets they sell, major airlines have responded by offering leisure travelers a cornucopia of shockingly cheap deals. No matter that they are now selling 11 coach seats for less than the price of one business-class ticket. No matter that I can fly to a wedding in Chicago for a song, but must forego a business trip because of the oppressive pricing.
Having entered the bizarro world of airline logic, I feel compelled to deconstruct their reasoning. Business travel is "price insensitive," they insist. Businesses put people on the road when times are flush and they cut back when times turn lean. Reducing fares for business travelers is thus counter productive because there won't be any appreciable increase in business travel. On the other hand, the airlines insist, leisure travel is "price sensitive" and holiday flyers are "discretionary spenders." Make the tickets cheap enough and people will find a reason to fly somewhere on a whim.
Of course, this tortured logic is mindless hogwash, disastrous as an economic model and an incredible affront to virtually every business traveler on the planet. But the airlines have proven, time and time again, that they believe it. They are unalterably convinced that business travelers--and the firms that foot the bills--make travel decisions without regard to the cost of travel. And they are collectively unshakable in their conviction that selling 11 coach seats to leisure travelers for less than the price of one business-class ticket is their only response to a decline in business travel.
What is obviously wrong with this bizarro scenario is that it bears no relationship to the reality that you and I live every day. Yes, business is not as robust now as it was a year ago. But the primary reason why companies are cutting back so dramatically on business travel is that it is too costly. T&E spending is the first item on the corporate chopping block because the airlines give corporate travelers no financial incentive to keep flying. Business travel is so egregiously expensive that even the dimmest bean counter looks like a genius when he cuts $1,268 day trips to Chicago out of the budget.
Anyone who is not an airline pricing executive knows there is a smarter way to react: Incentivize corporate flyers by offering them lower fares. We're not expecting airlines to sell us $182 tickets to Chicago, but we're not going to buy $1,268 seats in this economic climate, either. Yet cut our fares some--30 percent seems about right--and we'll probably get back on the road.
Let me repeat that in a way the pricing chuckleheads at the airlines may understand. I don't know anyone else in Chicago getting married, so I won't be buying any more $182 weekend roundtrips anytime soon. But my client would still like me to get to Chicago the Monday after next for that important presentation. He says I should parachute in for the day if I can keep my ticket cost under $850.
How about it, airline pricing guys? Incentivize Joe Brancatelli, the business traveler, to make that business trip after all. Be daring. Be creative. Sell me a roundtrip flight to Chicago the Monday after next for $850.
If you won't, I'll just stay in my office and take the conference call. And you'll have to round up seven other leisure travelers willing to pay $182 just to replace the revenue you lost on my canceled business trip.This column originally appeared at biztravel.com.