Airlines Raise Their Class Consciousness
Travelers flying coach on TWA these days may find their knees knocking right up against the new reality of the airline business. Reversing a strategy of offering the industry's roomiest economy section, the carrier is squeezing two inches--or roughly 15%--of legroom from each row in the back so it can nearly double the number of first-class seats. The goal: to make more such seats available to business travelers looking to upgrade.
This move, and similar efforts by rival airlines, are aimed at keeping all-important business customers happy. Taking advantage of a booming economy that has left companies willing to spend more on travel, airlines have hiked business fares a stunning 38% over the past two years. But consumers are still price-sensitive, and airlines have responded by dropping prices of advance-purchase leisure fares about 7%. As a result, carriers count on full-fare business travelers more than ever for profits. Across the industry, 9% of travelers now account for 44% of revenue.
PLACE TO SLEEP. So, airlines are eagerly overhauling marketing strategies to put even more emphasis on the corporate road warrior. American Airlines Inc. announced Feb. 3 that it will scrap some coach seats so it, too, can expand first class. Continental Airlines Inc. has check-in counters at Newark International Airport exclusively for employees of its largest customers, including AT&T. And TWA, American, and United are all reworking frequent-flier programs to calculate some awards based on dollars spent as well as miles flown. "We're trying to give more to the guy who paid more," says David A. Coltman, United's senior vice-president for marketing. The benefits extend to those paying full fares in coach, too: TWA gives full-fare fliers an extra mile for every dollar they spend.
Airlines have long had airport lounges and special menus for business travelers. But the latest changes take the wooing to new heights. When testing a new first-class sleeper seat, for example, United put one in the conference room next to President John A. Edwardson's office--and more than a dozen employees, including Edwardson, took turns spending the night in it in late '97.
No company is changing its strategy more than long-struggling Trans World Airlines Inc. In the early '90s, the carrier refurbished its planes to give coach passengers more legroom and went after leisure passengers with promises of better service and low fares. But "that strategy simply did not work," says CEO Gerald L. Gitner. TWA now finds itself with the worst mix of business and leisure travelers of any major airline. So in addition to expanding first class and overhauling its frequent-flier program, TWA will soon launch TWQ, a collection of new services such as automated ticketing on routes popular among business travelers.
DIFFERENT STROKES. It's the bargain-hunting consumers who get pinched by the focus on full-fare travelers.
Passengers flying with American and US Airways Group Inc. are more likely to find full coach cabins as a result of first-class expansions. And United has begun restricting the number of bags advance-purchase travelers may bring on some routes.
Less obvious moves are likely to follow. "In the past, airlines have handled everybody in the same class of service in the same way," says Mark F. Shields, a vice-president in Mercer Management Consulting Inc.'s aviation practice. "Increasingly, people will be handled in subtly but importantly different ways." For example, TWA has developed computer software that tells it precisely how much frequent fliers have spent on the airline in recent years. The carrier then can identify its most profitable customers and cater to them.
At British Airways, employees now approach passengers whose travel has dropped off and ask them on the plane if anything is wrong. That type of service is likely to become more common. After all, an $800 ticket should entitle road warriors at least to an extra blanket or two.