Airline terror concerns might hurt business travel

By MICHELINE MAYNARD and HEATHER TIMMONS New York Times

Saturday, January 3, 2004

The rash of holiday flight cancellations, security actions and terrorism warnings are going to compel many U.S. companies to reassess whether to send employees abroad in coming weeks, not only out of fear of attack but because of the inconvenience of canceled and delayed flights, business travel experts said Friday.

Kevin P. Mitchell, chairman of the Business Travel Coalition, which represents business travelers and corporate travel departments, said bookings could drop 10% to 15% after the latest incidents.

That would be particularly bad news for the airlines, which have lost business travelers since the industry's peak in the year 2000, well before the terror attacks on New York and Washington. Business travelers usually pay the highest fares and account for a disproportionate share of airlines' profits.

Dwindling business travel was a big reason why, by one key measure, airlines had their lowest revenue in history last year.

Airlines hoped that international travel to the United States would increase 5% during 2004, to an estimated 42.2 million arrivals from abroad, according to the Travel Industry Association, a trade group. That would have been the first increase since 2000.

Moreover, the carriers were particularly optimistic about the winter travel season, which they expected to improve over last year, when bookings were depressed by the SARS epidemic and the looming war with Iraq.

But the industry's outlook dimmed as more flights were canceled Friday

"Given the uncertainties involved, all of a sudden you're playing roulette with the possibility that a flight will operate," said Robert W. Mann Jr., an industry consultant in Port Washington, N.Y.

"The idea of on-time performance has a new dimension: Is the government going to cancel a flight for you?"

By Friday, seven flights bound for the United States had been canceled during the holidays, including three by British Airways, which also canceled a scheduled trip to Riyadh, Saudi Arabia, from London. The cancellations were in addition to jet escorts by military fighter planes within the United States, and the emergency landing of an Air France flight in Newfoundland, where the plane, passengers and baggage were searched.

The moves came a week after the government elevated its terror alert to "high," raising the prospect that an expected increase in travel between the United States and international destinations this year may be thwarted.

With companies closed for the New Year's holiday, neither the airlines nor travel industry experts would estimate whether the incidents were causing passengers to cancel other flights on Friday or over the weekend.

"Quantifying the effect on people's willingness to fly, or the overall cost to airlines at this point is nearly impossible," said Chris Tarry, an airline analyst based in London.

But Mann said the psychological damage could not be discounted.

"From an industry-wide level, this throws cold water on revenue growth," he said.

Mitchell said that the longer the episodes go on, the greater the chances that companies will curb staff members' trips, and the relatively small number of leisure travelers who fly internationally during winter months will put off their plans.

"There is definitely going to be an impact," Mitchell said. But, he added, "that impact will be mitigated if we get through this quickly."

The prospects of lost business loom largest at the carriers singled out by the government for terrorism concerns, particularly British Airways and Air France.

Should companies and travelers not feel secure flying those airlines, they are likely to shift their business to other carriers - - a practice the industry calls "booking away."

In London, British Airways said it was rebooking passengers from the canceled flights on later British Airways flights to the United States, rather than sending them to other airlines.

Sending passengers to competitors would cause British Airways to give up the revenue from those tickets, although it said it would give refunds to passengers who requested them.

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