Lufthansa introduced the service in response to the demand of business travelers. The airline says it has no immediate plans to apply the idea to other routes. But faced with the worst downturn in the history of commercial aviation, the airline industry is clearly becoming more open to novel solutions. Among the possibilities: a partial–and perhaps eventually total–segregation of business from leisure travel.
Even before September 11, U.S. carriers were on track to lose $3 billion for the year. Globally, airlines like Varig and SAS teetered on the brink of insolvency. The decline in business travel is at the heart of the problem. Grossly inflated business-class air fares once allowed airlines to offer cheap steerage rates to fill up the rear cabin. But if the expensive seats go unsold, low coach fares will be endangered.
The recession has hurt. Businesses are seeking alternatives to air travel: in the first half of this year, some U.S. providers of videoconferencing facilities reported revenue increases of up to 60 percent from corporate customers. Many firms ask employees to travel coach, or stay over a Saturday night to take advantage of weekend packages. More aggressive firms are choosing “fractional ownership” of corporate jets, entitling employees to a certain number of hours onboard. In North America, 114 companies took part in these plans in 1996; the number was 2,800 last year. As veteran aviation consultant Daniel Solon says, “A lot of airline executives are saying, ‘Business travel hasn’t come back,’ when what they should be saying is, ‘High-fare travel hasn’t come back’.”
For the industry’s heavy hitters, luring back business travelers is a top priority, as with Lufthansa’s business-class-only flights. Qatar Airways has been offering a similar service since November on a converted Airbus A319. QA has even arranged its seats in clusters of four, each centered on a mini conference table so travelers can do business while in transit.
Not all carriers suffer. No-frills airlines like Britain’s easyJet and Buzz are profitable. In the United States, Southwest managed to bring in a $21 million profit in the first quarter of 2002. Compare that with a loss of $171 million by Northwest, or the $269 million lost at US Airways. Meanwhile, New York-based budget airline JetBlue raised $158 million with its initial stock sale.
So what is their vision? For starters, they are profitable because they pay people less. They also operate laid-back, open-plan offices, where people genuinely seem to like working. Southwest Airlines employees are famously taught how to do an elbow-flapping “chicken dance” at the company’s Dallas training center. And most budget airlines operate short-haul point-to-point flights, rather than using the staff-intensive “hub and spoke” models of traditional airlines, which presume that travelers will value convenience over price.
Many budget airlines also fly only one type of plane, such as the Boeing 737. This simplifies training, inspections and maintenance operations. They also aim for short turnaround; on some fleets, planes spend little more than 20 minutes at the gate. They remind passengers to bring their own food, and dispense with onboard magazines and duty-free shopping. All this, in turn, means less time spent cleaning up litter between flights. British budget airline Go even sells food to its passengers, in the belief that marked-up snacks and drinks will bring in a substantial profit.
But perhaps the biggest innovation has been in the distribution of tickets. Just two years ago, Ireland’s Ryanair suggested it would one day sell all its tickets directly through its own Web site; today that goal is 90 percent met, and the elimination of travel-agent fees and commissions has enabled the airline to offer rock-bottom fares to holidaymakers. “People look at a 20 percent profit margin in an airline and think you are smuggling drugs,” says Ryanair CEO Michael O’Leary.
Who really has it right: big airlines that insist full-fare and business-class travelers will subsidize the industry for everyone else? Or the nimble up-and-comers that claim the future lies in offering passengers less for less money?
Maybe both: some observers expect a two-tier industry, with flag carriers like Lufthansa focusing on business-class clients while budget airlines cash in on the low-cost holiday-travel market. And the practical effects? It will mean more flights from secondary airports, like London’s Luton or New York’s Islip. It will mean, too, that coach passengers must accept spartan service, while business travelers will find airlines rushing to cater to their every need. Some observers hail the benefits of such segregation; others warn of the “de-democratization” of the skies. Either way, air travel will never be the same.
