Watershed: The future of U.S. business air travel

Transportation Journal

Volumn 35, Issue 3, 1996, Pages 14-32

  Stephenson, Frederick J ^a   Bender, Alan R ^b  

^a UNIVERSITY OF GEORGIA   (United States)

^b NONE

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[No Author keywords available]

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EID: 0002348885     PISSN: 00411612     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (51)

1. In 1990, Stephenson and Fox estimated that 34 percent of the people who flew on U.S. registered airlines were business passengers, but they accounted for an estimated 70 percent of the passenger revenues. See Frederick J. Stephenson and Richard J. Fox, "Corporate Strategies for Frequent-Flier Programs," Transportation Journal Vol. 32 No. 1 (Fall 1992), 38-39. This was also confirmed more recently by John Giffiths of Boeing Commercial Airplane Group in a presentation before the IATA 8th Annual Worldwide Air Traffic & Economic Outlook Seminar (1994), p. 29 of his overheads, where he reported that business airline travelers represented one-third of the trips and two-thirds of the revenues. Because business travelers tend to fly more frequently than personal/leisure patrons. Stephenson and Fox (p. 39) estimated tha the forme-generated 48 percent of the passenger trips ir 1990, a number higher than Giffiths later reported.
2. Neither the authors nor the ATA have been able to explain both the huge drop in 1992 to 37 percent and the subsequent huge increase to 48 percent in 1993. The study was not conducted in 1994.
3. "Just Saying No," Airline Business, March 1992, p. 42.
4. See Ata M. Khan, "Sociotechnical Factors in Air Travel: Some New Insights into Telecommunications Interactions," Transportation Research Record 1147, (Washington, DC: Transportation Research Board, 987), p. 6.
5. "Just Saying No," op. cit.
6. This article's focus is strictly business air travel. The authors are not addressing personal/leisure air travel, which we expect to grow and certainly be less susceptible to substitution threats. There is no satisfactory alternative to holding your first grandchild or being in Yosemite National Park. As long as low-priced fares are available, airline passenger growth is predicted.
7. Words of Pam Koles, Manager of Travel Services at BOC Group PLC, as cited in Bridget O'Brien, "A rlines Seek to Earn More From an Irritated Clientele," Wall Street Journal, March 16, 1992, p. B6.
8. Peter Coddington, "The Impact of Videoconferencing on Airline Business Traffic," Journal of Travel Research Vol. XXXI No. 2 (Fall 1993), p. 68.
9. Martin B. Deutsch, "We Fly In Interesting Times," Frequent Flyer, April 1993, p. 6.
10. Christy Fisher and Jennifer Lawrence, "Low Prices Alone Won't Fly in Biz Travel," Advertising Age, May 2, 1994, p. 42.
11. Andrea Rothman and Stephen Baker, "Short Hops, Soaring Fares: How Companies Cope," Business Week, February 1, 1993, p. 72.
12. Fran Golden, "Quality of Airline Service Is Faulted," Travel Weekly, April 5, 1993, p. 28.
13. See Del Jones, "Business Travel Is Back," USA Today/International Edition, October 12, 1994, p. 9B.
14. Paul Saffo, "The Future of Travel," Information Technology Special Report, Fortune, Autumn 1993, pp. 112 and 116.
15. Examples are (1) Ata M. Khan, "Sociotechnical Factors in Air Travel: Some New Insights into Telecommunications Interactions," Transportation Research Record 1147, (Washington, DC: Transportation Research Board, 1987), pp. 6-14, Ilan Salomon, "Substitution or Modified Mobility?" Journal of Transport Economics and Policy, Vol. 19, September 1985, pp. 219-235, and (3) Patricia Lyon Mokhtarian, "A Typology of Relationships Between Telecommunications and Transportation," Transportation Research, Vol. 24A. No. 3, 1990, pp. 231-242.
16. Examples are (1) Ata M. Khan, "Sociotechnical Factors in Air Travel: Some New Insights into Telecommunications Interactions," Transportation Research Record 1147, (Washington, DC: Transportation Research Board, 1987), pp. 6-14, Ilan Salomon, "Substitution or Modified Mobility?" Journal of Transport Economics and Policy, Vol. 19, September 1985, pp. 219-235, and (3) Patricia Lyon Mokhtarian, "A Typology of Relationships Between Telecommunications and Transportation," Transportation Research, Vol. 24A. No. 3, 1990, pp. 231-242.
17. Examples are (1) Ata M. Khan, "Sociotechnical Factors in Air Travel: Some New Insights into Telecommunications Interactions," Transportation Research Record 1147, (Washington, DC: Transportation Research Board, 1987), pp. 6-14, Ilan Salomon, "Substitution or Modified Mobility?" Journal of Transport Economics and Policy, Vol. 19, September 1985, pp. 219-235, and (3) Patricia Lyon Mokhtarian, "A Typology of Relationships Between Telecommunications and Transportation," Transportation Research, Vol. 24A. No. 3, 1990, pp. 231-242.
18. Salomon, ibid., on p. 232 concludes that the net effect of telecommunications will be a neutral effect on business-related trips. Khan, op. cit., concluded that teleconferencing may substitute for as much as 11 percent of business travel by air, stimulation (synergy) would increase business air travel by an estimated 1 percent, and therefore the overall limit of business air travel replacement by telecommunications was estimated at 10 percent (see page 13). Keep in mind that these articles are dated 1985 and 1987, respectively. Significant changes have occurred in the airline, business, and telecommunications markets since then.
19. Salomon, ibid., on p. 232 concludes that the net effect of telecommunications will be a neutral effect on business-related trips. Khan, op. cit., concluded that teleconferencing may substitute for as much as 11 percent of business travel by air, stimulation (synergy) would increase business air travel by an estimated 1 percent, and therefore the overall limit of business air travel replacement by telecommunications was estimated at 10 percent (see page 13). Keep in mind that these articles are dated 1985 and 1987, respectively. Significant changes have occurred in the airline, business, and telecommunications markets since then.
20. U.S. Travel Data Center, 1988 Survey of Business Travelers (Washington, D.C.: U.S. Travel Data Center, 1989), p. 27.
21. Lyndsey Whitehead, "Outlook for Business Travel," a presentation before the 1995 Travel Outlook Forum, October 17, 1995, Figure 2.4, n.p. (Citing USTDC Survey of Business Travelers as the source, no other information provided).
22. "Belt-Tightening, High-Tech Options Don't Business Travel," Travel Weekly, November 10, 1994, p. 17. Also, the present authors, using U.S. Travel Data Center numbers, calculated that business automobile trips had increased by 9.7 million between 1993 and 1994 while business air trips increased 3.6 million. Our source was U.S. Travel Data Center, 1994 Travel Market Report (Washington, D.C.: USTDC, Sept. 1995), pp. 19 and 21.
23. Delta Air Lines was the last of the nation's biggest airlines to initiate programs to slash annual operating costs and restructure the company. See Bridget O'Brien, "Delta Air to Pare Up to 15,000 Jobs, or 20% of Staff, in Big Restructuring, Wall Street Journal, April 29, 1994, p. A3.
24. Peter Coddington, op. cit., p. 65.
25. Don L. Boroughs, "A High-Technology Meeting of Minds," U.S. News & World Report, June 5, 1995, p. 48.
26. For instance, see (1) James D. Sawyer, "Getting There," Autoweek, July 9, 1990, p. 28 (table) and p. 30, Henry J. Brandt, "1992 Outlook for Business Travel," 1992 Outlook for Travel and Tourism, Proceedings of the U.S. Travel Data Center's Seventeenth Annual Travel Outlook Forum (Washington, D.C.: U.S. Travel Data Center, October 23, 1991), p. 90 Andrea Fothman and Stephen Baker, op. cit., p. 72, and (4) Del Jones, "Delta Halves Some Off-Peak Airfares," USA Today, August 25, 1993, p. B1.
27. For instance, see (1) James D. Sawyer, "Getting There," Autoweek, July 9, 1990, p. 28 (table) and p. 30, Henry J. Brandt, "1992 Outlook for Business Travel," 1992 Outlook for Travel and Tourism, Proceedings of the U.S. Travel Data Center's Seventeenth Annual Travel Outlook Forum (Washington, D.C.: U.S. Travel Data Center, October 23, 1991), p. 90 Andrea Fothman and Stephen Baker, op. cit., p. 72, and (4) Del Jones, "Delta Halves Some Off-Peak Airfares," USA Today, August 25, 1993, p. B1.
28. For instance, see (1) James D. Sawyer, "Getting There," Autoweek, July 9, 1990, p. 28 (table) and p. 30, Henry J. Brandt, "1992 Outlook for Business Travel," 1992 Outlook for Travel and Tourism, Proceedings of the U.S. Travel Data Center's Seventeenth Annual Travel Outlook Forum (Washington, D.C.: U.S. Travel Data Center, October 23, 1991), p. 90 Andrea Fothman and Stephen Baker, op. cit., p. 72, and (4) Del Jones, "Delta Halves Some Off-Peak Airfares," USA Today, August 25, 1993, p. B1.
29. For instance, see (1) James D. Sawyer, "Getting There," Autoweek, July 9, 1990, p. 28 (table) and p. 30, Henry J. Brandt, "1992 Outlook for Business Travel," 1992 Outlook for Travel and Tourism, Proceedings of the U.S. Travel Data Center's Seventeenth Annual Travel Outlook Forum (Washington, D.C.: U.S. Travel Data Center, October 23, 1991), p. 90 Andrea Fothman and Stephen Baker, op. cit., p. 72, and (4) Del Jones, "Delta Halves Some Off-Peak Airfares," USA Today, August 25, 1993, p. B1.
30. Coddington, op. cit., p. 64.
31. Joan M. Feldman, "Bane of Business Travel? Videoconferencing, With Quality Improving and Costs Falling, Is Biting Off a Chunk of Air Travel," Air Transport World, September 1993, p. 49.
32. Don L. Boroughs, "A High-Technology Meeting of Minds," op. cit., p. 46.
33. Ibid., p. 45.
34. In 1980, there were 2.3 million personal computers in use in the United States, In 1990, there were 50 million PCs in use and in 1995, the number was 90 million. Phenomenal growth rates occur in high-tech industries. See William J. Cook, "Software Struggle," U.S. News & World Report, June 19, 1995, pp. 48-49.
35. Airline business revenues were based on numbers in Stephenson and Fox, op. cit., Table 1, p. 40 and an estimated compound growth rate of 5 percent. The intent is to obtain a "safe" approximation of the import nice of the population studied. No effort was made to seek as precise a calculation as possible.
36. The USTDC samples approximately 1,500 adults monthly (18,000 annually) for its NTS survey. Each month's callings represent a systematic national random sample of the nation's adults. We chose this alternative because drawing a national random sample of business travelers independently is very difficult and expensive. Although other alternatives were explored, the NTS survey was the best option available for our purposes.
37. We have a lot of faith that this is a good estimate of the number of regular business air travelers in the United States. In 1990. Stephenson and Fox used numbers presented by the Air Transport Association of America to estimate that 19.5 million adults flew for business purposes. The NTS data indicate a higher number in 1994 (40.5 million) of which 24.6 million are regular business air travelers. Therefore, what the 24.6 million patrons have to say is very important, for it is these people, flying frequently on the airlines, that generate most of airlines' business passenger revenues, which in turn are 70 percent of all passenger revenues. These are the airlines' most important, experienced, and knowledgeable customers. See Stephenson and Fox, "Corporate Strategies for Frequent-Flier Programs," op. cit., p. 40, Table I.
38. At the time the questionnaire was distributed, 1993 data were not available.
39. Andrea Rothman and Stephen Baker, "Short Hops, Soaring Fares: How Companies Cope," op, cit., 72-73.
40. Choosing an appropriate time horizon in opinion research, and particularly in this case in light of the geometric changes in telecommunications technology, was most difficult. If we reached out too far, such as a twenty-year horizon, how much faith could be have in the answers? A five-year horizon also could be misleading and shortsighted. Telecommunications technologies as airline substitutes are too far left in their introduction period of their life cycle. Ten years was therefore chosen - to give enough time for the technology to develop and to give respondents a realistic chance of accuracy. It is the authors' opinion, however, that the greatest threat to air travel is in the twenty-years-plus horizon. Right now, our goal is to see if there is an irreversible trend toward telecommunications substitution and to confirm whether this trend has definitely begun, even if the impact at present is marginal.
41. While it would be desirable to have a quantitative measure of the expected level of substitution, like a 20 percent shift in ten years, purposely, we did not ask for this information. Telecommunications substitution and technology are still developing. We felt that this question should be asked in subsequent research when the answers would be more meaningful. Our purpose was to measure intent, not just among current users but also among present nonusers who are planning to try the technology for the first time.
42. Again, we did not ask for a prediction for the same reasons as in endnote 35.
43. U.S. Travel Data Center, 1994 Travel Market Report (Washington, D.C.: U.S. Travel Data Center, September 1995), p. 21. To avoid confusion with prior numbers, such as in Table 1, the present numbers (55 percent vs. 43 percent) are calculated by dividing the total number of business airline trips by the total business trips by all modes. In 1994, an estimated 94.9 million business air trips were taken, compared to an estimated 121.4 million auto/truck/RV trips. However, as noted earlier in the article, only 31 percent of the sample said they used air transportation on their last business trip.
44. This includes from Table 10 the 8.1 million who decreased business air travel and the 9.6 million whose business air travel stayed about the same.
45. The Wall Street Journal recently reminded its readers of the fragile nature of business air travel, when it said. "Along with leisure trips, business travel has cooled off too. That's partly a reflection of the nation's economy, but it's also a sign that corporate America has lost patience with the rising cost of business travel." Again, it cites a company, Hazeltine Corp., that has turned to a new and cheaper alternative to travel - videoconferencing - for many meetings. See Jonathan Dahl, "High Prices Cool Summer Travel Forecasts." Wall Street Journal, May 25, 1995, p. B1. It also points out (on page B9) the inherent danger of deep discounting, which created a surge in airline trips but a substantial loss of revenues in 1992. Trip statistics are really not the way an airline will stay in business, but if the airlines keep prices high, they will provide the catalyst for additional substitution to automobiles and telecommunications.
46. Joan M. Feldman, "Bane of Business Travel?..." op. cit., pp. 44-45.
47. In 1990, the average airline ticket price for a business traveler on a U.S. airline was $493, compared to $194 for a personal/leisure traveler, or about two and one/half times as much. See Stephenson and Fox, "Corporate Strategies for Frequent-Flier Programs," op. cit., pp. 39 and 40 (Table 1, footnote "d"). The reason for this is airline pricing strategy, which charges more for those who book flights on short notice.
48. See Cathy Carroll, "Index Shows Domestic Air Fares Dip 8% in 1994," Travel Weekly, February 6, 1995, p. 37.
49. Ilan Salomon, "Substitution or Modified Mobility?" and Ata M. Khan, "Sociotechnical Factors in Air Travel:...", op. cit., as explained in endnote 15.
50. Don L. Boroughs, "A High-Technology Meeting of Minds," U.S. News & World Report, June 5, 1995, p. 48. This is an example of a most recent article that updates teleconferencing technological progress and marketing success.
51. Ibid.