Air Transport World

The rise of the leisure class. (air line marketing)

In both word and deed, current airline marketing programs concentrate on business travel. Despite what everyone agrees is the enormous potential to generate new discretionary traffic, frequent flyer programs and travel agency rebates, commissions and overrides are geared to one thing: increasing market share by retaining current business flyers or stealing another airline's commercial travelers.

True, big airlines such as United American and Northwest claim to spend from 30-40% of their ad budget on leisure travel. But that is far less than the equivalent percentage of leisure traffic. And those ad expenditures are a drop in the bucket compared with the promotional budget for business travel.

USAir Executive VP-Marketing Randall Malin doesn't mince words. He calls the current marketing focus "dumb." In a recent speech to a group of travel agents, Malin declared, "...the marketing resources of the airlines today are almost totally committed to the time an airline provides for override commissions and frequent traveler programs, there is very little left over to use in promoting and developing travel."

One place to go

One could ask, "So what?" Airlines have enjoyed a travel boom in the past couple of years, the result of an upturn in the business cycle. Load factors for major airlines in the first nine months of 1985 were up 3.5 points, according to First Boston, to 59.8%. That figure is already above the point that airlines in the regulated era used to consider a good showing.

The problem is that filling 60% of capacity is no longer good enough. Even with unit costs on the decline, yield-reducing fare wars and the constant threat of new, lower-cost entrants demand a search for new revenue. Given the relative stability of the business market, there is only one place to go: discretionary travel. "The airline industry is the only one that consistently throws away one-third of its production," says Robert Joedicke, airline analyst for Shearson Lehman Bros. "The key is stimulate discretionary travel."

No one denies that the market is there to be tapped. Northwest Airlines Executive VP T.J. Koors thinks there has to be an increase in discretionary travel. "People have more time and more money to spend. They seem to take travel for granted, like a utility," similar to electricity and running water.

It is unfair to say there are no attempts to stimulate leisure demand. The recent Thanksgiving holiday promotion generated travel that most airlines insist was new, not diversionary. Delta, for example, says its load factors for the three days were up 55.3%, 20.7% and 31.2%, respectively. Travel on the Wednesday before and Sunday after Thanksgiving was "normal."

Despite the apparent success of the Thanksgiving fares in 1985--losses for the light days probably were reduced even if actual profits weren't made--there was a good deal of agonizing reappraisal of whether and how such a deal would be offered again. …

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