Planners Shun Low-Cost Carriers

Although low-cost carriers like Southwest and Kiwi have made inroads

into the corporate market, fewer companies are using them specifically

to transport meeting groups.

Some planners perceive low-cost airlines as unsafe or inappropriate for

serving the group market, preferring to contract with major carriers,

which they believe offer a predictable level of service and more

simplified billing procedures.

Even in cases where planners would like to use such carriers in their

group program, the airlines often do not have the route structure to

support the meetings market, or they lack the advantage of brand

recognition that major carriers enjoy. And when planners do use these

airlines, it usually is on an experimental basis or because the carrier

happens to be a dominant presence in the region.

Of the close to 400 planners polled in the Meetings Monitor survey, 26

percent said they had used low-cost air carriers for a meeting. When

Meetings Today first asked this question in 1994, nearly 29 percent said

they had used such carriers.

“Low-cost carriers don’t specialize in the business market, and I don’t

think it would be appropriate to put my travelers in that environment,”

said Bill Severson, manager of commercial services, distribution system,

with Allen Bradley in Milwaukee. Rather than work with group ticketing,

Severson works with American Express and relies on the negotiated

corporate rate.

“Last year we tried to use ValuJet for an Orlando meeting, and several

executives refused to fly with the carrier,” said Kris Erickson-Kastner,

manager of meetings and functions at The Trane Co.’s commercial systems

group. “This was well before the accident that grounded them; at that

time, the press reported that it had some problems with maintenance.”

Because of safety concerns and because ValuJet wouldn’t take the

company’s Diners Club card, Erickson-Kastner wouldn’t consider booking a

national meeting contract with a low-cost carrier.

Many planners can use carriers in their region, but have trouble when

flying executives in from all over the country. “We attempted to use

Southwest for a partner meeting last year, but many of our travelers

weren’t in the carrier city,” said B.J. Ackerman, Southwest regional

meeting coordinator with Ernst and Young in Irving, Texas. “We were

going to use them for part of the group, but it turned out that Delta

and America were matching fares.”

The word from planners seems to be: Expand routes and schedules to

attract the group business-although this approach risks giving low-cost

carriers the operating economies of their major counterparts. Rob

Koulat, a spokesman for Newark, N.J.-based Kiwi Airlines, said that

while many corporate travelers (about 60 percent of the carrier’s total

business) filled Kiwi’s seats-mostly on flights to Chicago, Atlanta, New

York and Orlando-very few corporate groups purchased blocks or chartered

flights, an option becoming increasingly popular for associations based

in the New York area. “We intend to go after the corporate group market

over the next few months,” Koulat said. “We see that as our next area of

growth.”

Southwest Airlines also has expressed interest in expanding its

corporate group business. Michelle Redford, manager of group and meeting

product marketing at Southwest, recently met with Mona Kestler, director

of sales for Dallas-based Bauer Audio Visual, to discuss a team

marketing effort to attract more corporate accounts. Kestler already

partners with the Kerville Bus Co. and Inn on the River, a bed and

breakfast facility in Glenrose, Texas, to host gatherings with corporate

planners to “build rapport and trust before attempting to close any

deals.” She had invited a representative from Southwest to attend one of

her functions last year, and Kestler’s soft sell so impressed the

organization that it decided to join her team. So far, Kestler has

attracted the lion’s share of A/V work from Frito-Lay, State Farm, the

southern regions of Xerox Corp. and Northern Telecom. Southwest will be

listed as a sponsor on Kestler’s future invitations to meeting planners,

which Redford hopes will extend the airline’s reach into the corporate

group market.

But in order to do so, Southwest, Kiwi and others will have to fight the

perception that cheaper seats translate into too much of a value

trade-off. “Our flyers are very particular-we had somewhat of a backlash

when the several carriers at the local airport went to flying commuter

shuttle planes instead of jets a few years ago,” said Cherise Baker, a

meeting planner with Koch Industries, a diversified oil and by-products

production company in Wichita, Kan.

Baker explained that although a good percentage of the 300 or so sales

and training meetings require some personnel to fly, the groups are

either too small or too “last minute” to make negotiation for group

packaging possible.

Although she would consider using Vanguard, the low-cost carrier that

flies out of Wichita, as well as using Southwest for the sales meetings

in the company’s southern region, she just as often gets the lowest fare

using the company’s negotiated rate.

Of the Monitor respondents who used low-cost carriers, 35 percent

reported savings of 11 to 20 percent off the major carriers’ pricing,

while 23 percent reported savings of 21 to 33 percent.

Sherry McVay, president of Winter Park, Fla.-based Current Events, an

independent planner that also offers travel booking, has used Southwest,

ValuJet and local carrier Air Train, saving anywhere from 11 to 20

percent off the major airlines’ fares. The catch-22, she said, is that

good fares came at a cost, either because she couldn’t book through the

CRS or because the airline had an unusual commission structure. Then,

after the ValuJet crash, many of her clients were fearful of flying with

the carrier. Still, McVay said, what she liked about working with

low-cost airlines was their attitude toward the business. “They didn’t

take it for granted,” she said. “I find that unless my group is very

large, the airlines don’t really care about my business that much.”

To some, however, the distinctions between major and low-cost carriers

are blurring. Lauren Miralia, president of the Adviso Group Ltd., an

incentive management company based in White Plains, N.Y., uses all of

the low-cost carriers, primarily due to a directive from his clients

that if a large group of senior-level executives are flying to the same

destination, the group should be broken up and placed on several

carriers. On trips overseas, he is just as likely to use a low-cost

airline as he is America or United.

“Of course, we want to find out the age and maintenance schedules of the

planes, and we will not use charter operations because of safety

concerns,” Miralia said. “But, with respect to fares and service, I

don’t see much difference in Continental, TWA and the low-cost

carriers.”