Fear and Loathing (and Panic) in Fareland

"Most major U.S. carriers this week posted losses for the normally profitable second quarter and they all blamed a sudden and precipitous decline of business travel. Privately, the carriers admit they see two disturbing long-term trends: continued defection of business traffic to low-fare alternate carriers and reduced demand for business travel through at least the second quarter of 2002. All that real and potential red ink is finally leading some executives to think the unthinkable: Only a wide-ranging change in how the major carrier price their product will entice business travelers back to the fold. "Business travelers have spoken and they are telling us the old model of inflated business fares and below-cost leisure sales won't cut it," one executive told me Wednesday. In fact, four airlines are at least discussing radical changes to their fare structures. Among the ideas being considered: lower-cost, advance-purchase first-class fares; non-refundable, walk-up coach fares as much as 40 percent below traditional full-fare Y prices; and even low-cost, advance-purchase fares that do not require a Saturday-night stay. Will any of the innovations come to fruition? "The longer we get pounded, the more likely it is that we'll try something new," one pricing executive said."

-Joe B.
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