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Sunday, 06/30/2002 7:00:46 AM

Sunday, June 30, 2002 7:00:46 AM

Post# of 104
Here's an opportunity, imo.
Short Delta, Long AirTran:
Delta Curtails Discounts for Its Corporate Clients
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By Nancy Fonti, The Atlanta Journal-Constitution

Jun. 29--The cheapest airfares just got a bit more expensive for Delta Air Lines' corporate customers.

The Atlanta airline is no longer allowing corporations to use negotiated discounts on its lowest-priced fares, travel managers confirmed Friday.

The move, announced in e-mails to corporate clients, comes as Delta and other big carriers struggle with slumping revenue and large losses.

Northwest Airlines had already made a similar change.

Corporations typically negotiate special discounts of 5 percent to 15 percent with an airline on select routes.

In the past the discounts have applied to both expensive full-fare tickets bought at the last minute and deeply discounted fares bought well in advance of travel.

The problem for Delta and other airlines is, for the past year or so, businesses have prodded travelers to buy more of the latter.

That trend factored into a nearly 10 percent decline in revenue per seat-mile at Delta in the first quarter.

In a memo to travel managers, Delta said its top 75 corporate customers spent 35 percent less on tickets in the first quarter of 2002, compared with 2001.

"As a result of a dramatic reduction in published fares, aggressive discounting by Delta in low-end inventory is no longer practical," the airline said.

A spokeswoman declined to elaborate Friday. "It's a matter between us and our customers," she said.

The cheap fares no longer eligible for discounts are similar to fares charged by low-fare carriers AirTran Airways and Southwest Airlines, travel managers said.

"Ten or 15 percent off of a $149 fare is not huge bucks, but if big corporations and travelers use 5,000 tickets a year, that could be significant," said Atlanta travel consultant Chris McGinnis.

"It's total clash of corporations. All corporate travel managers are trying to get employees to use cheap fares, and succeeding to some degree.

"Delta's revenue is weak because of that, and they are trying to recoup some of that money."

Ron Sharer, travel manager for Atlanta-based contact lens maker CIBA Vision, said employees frequently buy tickets 21 or 14 days ahead of travel to save money.

He thinks the airlines should make up their revenue shortfall by lowering unrestricted fares to revive business travel while raising leisure-oriented advance purchase fares.

"We know the airlines are losing money every day, so something has to be done, but there needs to be a total restructuring of airfares," Sharer said.

J.P. Morgan analyst Jamie Baker called the move a "de facto fare increase" and noted the industry hasn't been able to raise fares this year.

"Clearly Delta wouldn't engage in revenue discounts if it didn't think it was revenue-positive," he added.

Citing the airlines' poor revenue picture, bond rating agency Standard & Poor's on Friday cut credit rating on five airlines, including Delta.

Though it went to "BB" from "BB+," Delta's rating remained the strongest of the group.

Ratings for American, United, Continental and Northwest also were cut.



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