Airlines' focus on Web irks corporate clients

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NEW YORK -- The push by major U.S. airlines to increase Internet bookings appears to be driving a wedge between the carriers and their best customers.

A growing number of corporate customers, who account for about two-thirds of airline ticket sales, are up in arms because fares offered on the Web are often unavailable to business travelers. The airline industry, by its own design, has created a system that offers heavily discounted seats to leisure travelers at the last minute, while business travelers, the main customers of most carriers, are forced to pay hundreds of dollars more per seat.

A bigger concern for corporations is that Internet fares are enticing travelers to book "out of policy," which in the end means corporations fail to meet their quarterly market share requirements and occasionally lose their negotiated discounts.

"They are sabotaging their customers' ability to make their [market share] hurdles," said Shannon Stewart, vice president of marketing at Navigant Inc., an Englewood, Colo.-based corporate agency.

The growth of Internet booking has even found critics within the airline industry. "Anytime an airline comes out with any customer offer that is so aggressive that it basically circumvents the arrangements you have with your large customers, it creates tension," said Pat Terrion, senior vice president of sales for British Airways.

Terrion, a frequent critic of many airline Internet sites, said the industry is enticing travelers to book travel at the last minute, away from their designated agencies and away from their preferred airline partners. "You have to learn how to promote your product through the Internet in a way that adds value," said Terrion. "If you sell purely on price, you lose on price." Despite his concerns, Terrion believes 30% of BA's direct bookings will be sold over the Web by 2004.

Since the Internet exploded in the mid-1990s, travel has been considered one of the most lucrative markets for electronic commerce. In recent years the major airlines cut commissions for third-party consumer Web sites, thus preventing outside software vendors from dominating the distribution of travel.

A more recent trend is for airlines to offer on-line fare sales that telephone reservationists or travel agents cannot access. For example, Northwest Airlines and Continental Airlines offer last-minute weekend travel that can be booked on line for an extra discount of $20. If the fares are booked by telephone, the traveler pays the extra $20.

Many Web sites also offer bonus miles to frequent travelers, an incentive likely to entice road warriors who spend a lot of time on the go.

Ralph Brown, president of R.D. Brown, a travel consulting firm based in South Elgin, Ill., said business travelers who search the Web often believe they are being good corporate citizens. "A lot of management people do feel financially responsible to watch the company's money," said Brown. He said some employees may be concerned that a manager will punish them for spending too much for tickets, or worse, a company will refuse reimbursement if the ticket is too expensive or booked outside of policy.

Brown said the best defense for companies is to have a "controlled Internet solution," essentially a bookable Web site for corporate employees that conforms to policy and places the booking through the designated agency.

Companies also need to tighten up travel policies. One way is by designating a single charge card for the entire company.

Brown said the amount of travel dollars lost to the Internet is usually less than 3% at a given company. He added that smaller companies, like law firms, are more vulnerable to Web bookings than large companies with strict oversight.

Cindy Heston, travel manager at Thomson Consumer Electronics, in Indianapolis, said Web bookings have not been a major threat to her company's travel policy but have been more of an annoyance.

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