Seat 2B By Joe Brancatelli
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Watch Your Wallet, The Airlines Are Coming
July 28, 2016 -- When things were rotten for airlines and they lost billions of dollars year after year, the standard response from C-suite executives was that we business travelers weren't paying enough.
And now that things are absolutely fabulous and airlines are rolling in the green and racking up record quarterly profits? Airline executives still insist we're not paying enough. They're also rushing to take steps to make sure we pay lots more to fly from Point A to Point B.
Airlines have "a lot of low fares in the market" and business travelers "are getting a deal right now," groused American Airlines president Scott Kirby said last week just hours after American announced a record second-quarter pre-tax profit of $1.5 billion.
Fares business travelers paid "quite simply didn't keep pace" with expectations, Delta Air Lines president Glen Hauenstein complained last week on the day his carrier registered quarterly pre-tax income of $1.7 billion.
Do these guys hate us? Yes, they do, but it's more than that. Airline executives simply can't imagine a world where business travelers get a fair deal or pay simple fares. We are, to them, human cash registers.
The six largest U.S. carriers -- American, Delta, United, Southwest, Alaska and JetBlue -- generated about $6 billion in pre-tax income in the spring quarter. Yet all they talked about in earnings calls this month was the need to charge us more, the imperative of reducing flight capacity to drive up fares even further and their desire to invent new ways to make us fork over our hard-earned dollars.
Kirby of American, for example, lamented that the old airline bag of tricks -- advance-purchase restrictions, day-of-travel rules, Saturday-night stay requirements -- "doesn't work in today's world anymore." And his comrades at the other airlines all promised to get tougher and meaner with us.
Are these guys crazy? Well, yes and no.
They honestly believe we should pay more for the flexibility we need. Airlines feel that leisure travelers buy the cheapest fares that they can find, but business travelers should be prepared to pay for more frequent flights or for fares that don't come with restrictions or cancellation or change fees. That's why a leisure traveler can pay, say, $299 for a roundtrip, but we business travelers might be asked to pay $899 for the same itinerary.
But that's old news. We've talked about this systemic discrimination many times in Seat 2B and it's been a constant drumbeat for as long as I've been a business traveler.
What's newer and more troublesome is how the airline industry believes that business travelers should pay higher fares than others and then pay still more to duplicate the perks that were once included in those inflated prices. Newer still is the airlines' decision that they don't even need to reward our high-priced loyalty.
And it won't surprise you to learn that the airlines' second-quarter earnings calls were filled with promises from C-suites executives to take immediate steps to keep inflating our prices.
Convinced they have too many seats chasing too few flyers, especially across the Atlantic and to South America, they plan sharp seat reductions in the months ahead. After years of cuts, airline capacity had risen about 5 percent lately. But the carriers will hit the brakes in the months ahead. A special target: flights between the United States and London, which Delta says accounts for more than a third of all the traffic between the U. S. and Europe. Both Delta and United this fall will cut routes, reduce frequencies and use smaller aircraft in an effort increase yields across the pond.
Also coming: more ways to stop business flyers from buying the cheapest fares on the market. The new "basic economy" rates, pioneered by Delta and hurriedly being copied by other airlines, are so restrictive that some call them "hate selling." Hate it may be, but it works. Delta Air Lines says hardball tactics convince 65 percent of flyers who start to book basic economy fares to pay more.
All this said, however, the texture of the airlines' disdain for business travelers is somewhat different this time. There's a desperation to it. Why? Because the airlines themselves are hated. Not by us so much, but by the security analysts who cover the industry. The analysts are throwing financial shade at airlines with gusto and abandon.
For all the profit that airlines earned in this spring, the analysts are not happy. In earnings call after earnings call, analysts ripped airline C-suiters for declining PRASM, an acronym that stands for the metric "passenger revenue per available seat mile."
For all their willingness to bully us, airline executives live in mortal fear of the analysts. If you have the energy or the interest to read the transcripts of the earnings calls, you can experience this quivering fealty from Delta or American. Or you can read all about it from a reporter who listens in on the quarterly bullying.
The problem with airlines slavishly letting the analysts call the shots? Analysts and the airline executives know there isn't much that can be done to increase revenue from leisure travelers. They are price-conscious, discretionary flyers who'll stay home if fares and fees get too high.
But business travelers? We're supposedly price-insensitive, must-fly customers. If airlines succeed in mollifying the analysts and getting PRASM up, the additional revenue will be beaten out of us. Our fares and fees will soar as carriers erect more walls and higher barriers around their lowest prices.
In other words, just like in good times and bad, it means we're in for another period of airlines vociferously claiming we don't pay enough.