Up in the Air

For meeting planners, 2008 is likely to be remembered as The Year of Airline Agita. The soaring cost of jet fuel has led to shutdowns, bankruptcy filings, capacity cuts and fare hikes. And there’s no end in sight. A quick recap:

* In the first five months of this year, 24 airlines ceased operations around the world, according to the International Air Transport Association. Since December 2007, eight U.S.-based carriers shut down (in order of demise: MAXjet, Big Sky, Aloha, ATA, Skybus, Eos, Champion and Air Midwest). In April, Frontier Airlines filed for Chapter 11.

* Beginning in March, unexpected maintenance inspections by the Federal Aviation Administration grounded hundreds of airplanes at American, Southwest, United and other carriers, leading to thousands of delayed and canceled flights.

* At press time, talks of mega mergers between Delta/Northwest and United/US Airways had quieted, as Chapter 11 began to seem more feasible.

* Desperate to stay afloat, carriers have been dropping unprofitable routes in droves, particularly to secondary markets. In fact, airline service has been eliminated in 60 U.S. communities that had some airlift in 2007, and 37 more will lose all service later this year, according to the Air Transport Association.

“I’m completely irritated at the airlines,” says one planner who had to accommodate stranded passengers on two carriers due to maintenance inspections this spring. “We took a double hit.” Unfortunately, there’s more irritation to come.

Delays, cancellations, hassles

Kevin Mitchell, chairman of the Business Travel Coalition in Radnor, Pa., says the maintenance lapses uncovered by safety inspections are “the tip of the iceberg” and calls the FAA “dysfunctional.” He says, “This is fast becoming a duty-of-care issue for major corporations and bad news for airlines facing a slowing economy.”

A source at the union representing FAA safety inspectors told M&C that specific aircraft types or even entire airline fleets are subject to being grounded at any time, so passengers need to be patient all through the summer months.

Terri Breining, president of Concepts Worldwide, a meetings management firm based in Carlsbad, Calif., says planners need to brace for more havoc. “If I were doing a meeting in a one-airline town, we’d have to look at what other options are available. You can’t just move a meeting because of an airline problem. This really is about contingency planning -- and it’s very much a part of the meeting planner’s job. We haven’t had to pay attention to this in the past, but now we do.”

Lianne Pereira, associate director of events and meeting services for KPMG in Dallas, recently suffered through widespread flight disruptions from the region’s two largest carriers, American and Southwest. However, she’s philosophical when she discusses the FAA inspections that led to the chaos: “I think that was the airlines’ big wake-up call. It needed to happen. It showed the nation there was an issue. These delays are painful but necessary. I would rather be grounded than endangered.”

Out of business

Airline economics suggest there will be further shutdowns in 2008. “Absent a merger or two, and given high jet fuel prices, a case can be made that more than a few big and small airlines are on a path to some form of restructuring or even bankruptcy,” says Vaughn Cordle, an aviation analyst and CEO of AirlineForecasts in Washington, D.C.

In Indiana, the shutdown of ATA -- in business since 1973 -- caught planners unaware. “Of course it was a huge disappointment to lose ATA, since it was by far one of our biggest carriers,” says Amanda Cecil, assistant professor of tourism, conventions and event management at Indiana University-Purdue University in Indianapolis. And in Hawaii, ATA’s grounding the same week as Aloha was a double hit.

Aloha, which had been in operation since 1946, stranded thousands of passengers, including many meeting clients. “Right after the shutdown, our agency and others pulled together an emergency plan,” says Michael Murray, vice president of sales and marketing for corporate meetings and incentives at the Hawaii Visitors & Convention Bureau in Honolulu. The plan included reaccommodating passengers, chartering flights to the mainland and working with local hoteliers. “Everyone stepped in to help,” says Murray. “The hotel industry really came through with discounted rates and even free nights.”

It took nearly a week to move all the stranded clients, but most were helped within three to five days. Murray says a key lesson is to act quickly: “Within one day, our website became the portal for all communication with meeting planners.”

David Kliman, president of The Kliman Group in Sausalito, Calif., and past international chairman of Meeting Professionals International, gives high marks to the HVCB: “They lost one million seats in Hawaii. The industry really responded well.”

Who’s next?

The survival of Denver-based Frontier Airlines is important to Steve Kinsley, owner of Kinsley & Associates in Littleton, Colo. But the carrier’s Chapter 11 filing in April isn’t too troubling, he says, since the airline continues to fly. But Kinsley does predict more financial pain: “I honestly think there’s more to come with consolidation. We all have to expect to pay higher fares.”

In fact, analysts say more shutdowns are possible this year. As Hawaii’s Murray notes, “The airline fuel issue is global. We believe there will be reductions in service from low-fare airlines and that legacy airlines will not provide additional lift.”

He’s echoed by Pereira: “With the current conditions, it’s practically guaranteed that we will see more shutdowns.”

How such problems will impact meetings isn’t clear. But Kinsley fears rising fares might mean declining attendance: “In some cases, instead of sending four people, a company might send three or even two people,” he says.

Airline mergers are another worry. An April survey of 207 members by the National Business Travel Association found 80 percent believe further airline consolidation by 2009 is inevitable. Kevin Maguire, NBTA’s president and CEO, says, “Travel buyers know airline consolidation, such as the potential Delta-Northwest merger, might create more financially stable airlines with stronger networks, but they are concerned about the prospects of declining customer service and changes in their relationships with new, merged airlines.”

In the case of a merger, Breining advises, “You have to accept the fact that these airlines are going to merge. Then you have to speak to the rep from your existing airline contract to get as much information as you can about service changes and other issues. Then speak to the airline doing the acquiring, rather than just sitting back and waiting. You have to ask questions.”

Preparing for anything

Cecil also stresses the need for knowledge. “Planners have to be in tune with what’s going on, not just in travel but in the world economy,” she says.

Breining agrees: “Probably the most important thing to do is pay attention to rumblings we hear in the news.” She notes that in the past, planners tracked the travel plans of speakers and VIPs but not attendees, and now that’s changed. “I would be much more proactive,” she says. “Gather that information in advance, and create a central database.”

Pereira notes that many corporate planners still allow attendees to book their own travel but suggests centralizing the process for better tracking and control. “I would make sure to use professional travel agents during this next year or so,” she advises. “It’s well worth the cost.”

Kinsley adds, “Most of our customers work with corporate travel managers. My advice is to stay in touch with those folks constantly.”

It might also be time to re-examine airline partnerships. According to Pereira, “If you’re fortunate enough to be booking new events, you should think about cities with two or more airlines, and not one-airline cities.”

Kliman adds that it can pay to use more than one carrier: “I think that’s prudent for just about any event.” However, he notes that with a small movement of 100 to 200 people, this might be logistically and financially difficult.

Kliman and other sources suggest the following additional strategies for coping with airline woes.

* Tap into strengths through corporate travel partners and organizations like NBTA. If you haven’t already, it’s time to establish relationships.

* It’s critical to maintain flight manifest information online and at the ready.

* Acquire at least a base knowledge of airline structures and routes to the meeting destination, and be able to provide reasonable and realistic alternatives.

* Consider concierge services via charge card programs or vendors such as Maestro, and be cognizant of how to activate them in a crisis.

“Planners have got to be on their toes,” says Kliman. “They really need to follow the financial performance of the airlines they’re using. It’s not enough to just track a carrier’s on-time record. They have to do research and be proactive. Don’t let yourself be surprised.”

“Every meeting planner worth his salt always has a Plan B,” says KPMG’s Pereira. “I think when the hard times come, that tests the mettle of the people in this industry.”