After a year, National Envelope ditched the agency, and LeVan began purchasing airline tickets online. Although the company hasn't netted substantial savings by making flight reservations over the Net, LeVan says virtual booking provides greater financial oversight. "We can print out monthly reports that show us the lowest fare offered and what we chose and how much we've saved," she says. LeVan estimates she's cut the time she used to spend booking travel arrangements in half.
Purchasing E-tickets adds to the convenience. Electronic tickets don't get lost in the mail, and travelers with virtual tickets often avoid long lines at check-in counters. Further, officials at American Airlines recently announced plans to impose a $10 surcharge on paper tickets. Executives at other airlines are reportedly considering following suit.
In fact, the only disadvantage of online travel booking, LeVan says, is making arrangements for events that are still a ways off. In those cases she prefers not to get ticketed immediately — particularly if dates for meetings might change. But online, she says, "you can only book if you're willing to be ticketed right away."
Given the red-hot competition in the virtual travel sector, the restrictions will likely be jettisoned. So, too, will the practice of not offering discounts on last-minute seats for business travelers. At CEI, for instance, O'Neal says the now-defunct iTravel was matching or beating any fare listed on rival Web sites. "Sometimes it was only by $2," she claims. "But sometimes it was by $40."
Chump change? Not for companies that book a lot of flights. O'Neal notes that iTravel also had 14 types of reports that recorded every travel purchase CEI made. All she had to do to access the info was bring up a personalized page on the site, then type in her company code.
Such easy access to detailed data is a real departure. "The travel agency I was previously using," says O'Neal bluntly, "couldn't pull up more than a month's worth of historical information." For travel managers, assessing trends on 30 days of data hardly qualifies as rigorous oversight. It does, however, sound a whole lot like flying blind.
Esther Shein is a freelance writer specializing in finance and technology.
Bucket Seats
As a rule, buying tickets for flights at the last minute is a real bad business decision. Sometimes those tickets are five times the cost of advance-purchase fares. Of course, business travelers usually have little choice but to pony up. "If you have to go to a meeting to close a $1 million deal," says Lorraine Sileo, an analyst at PhoCusWright, a research firm for the online travel industry, "you're not going to renege because the airfare is tripled."
It seems pretty likely that airline executives know this. They also know where their bread is buttered. A $199 special for consumers may increase load factors, but airlines really mop up on higher-priced coach sections, or buckets. Mostly, those buckets are filled with business travelers — travelers who will pay almost any price to get to a destination. "History tells [the airlines] typically how many seats they can sell at certain times," says Diana Cronan, spokeswoman for the Air Transport Association, the trade association for the 12 major U.S. airlines. "There is a demand for that last-minute ticket, so the value is higher."
Cronan also points out that by holding tickets until a day or two before a flight, the airlines are taking a chance that they'll get stuck with empty seats. In addition, some industry observers note that last-minute tickets are usually changeable and refundable, while advance-purchase tickets typically are not. The implication here: Business travelers pay for flexibility.
Not everyone buys these arguments, though. The sky-high fares that airlines charge for walkup tickets have some critics and business travel groups howling. A few even claim that the charging of outrageous sums for last-minute airline tickets constitutes price gouging.
Actually, it doesn't. According to federal law, gouging applies only to unfair pricing practices that occur during a state of emergency. Indeed, if airline executives are guilty of anything, it's knowing their market. The computer reservation system used by major carriers gives each airline almost instantaneous information about what competitors are charging on routes. Thus, fares charged by airlines — particularly last-minute fares — tend to move in lockstep.
That's not likely to change anytime soon. Industry consolidation during the past 15 years has put the remaining airline operators in the left seat. "They're engaging in [these pricing practices] because they can," asserts Kevin Mitchell, chairman of the Business Travel Coalition, a group representing major corporations. Mitchell points out that in some locales a single carrier owns a 60 percent market share. "That enables them to charge fares that are above competitive levels," he insists.
A white paper recently released by the Department of Transportation appears to support this contention. According to the study, prices based on demand characteristics such as last-minute departures, rather than on the cost of providing the product, are "characteristic of a market in which the seller has a degree of market power." Adds Mitchell: "If you don't have new low-fare entrants, you won't have any chance of fixing the market power problem."
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