Originally created 09/21/03

Businesses are using travel alternatives

Computer Associates International Inc. has cut its annual travel budget by 20 percent since 2000 and the software maker does not foresee increased spending in 2004.

Telephone service provider Bellsouth Corp. also plans to limit travel expenses, staffing five full-time travel agents compared with 50 just three years ago, and holding video conferences whenever possible.

At Lockheed Martin Corp., travel transaction costs are expected to decline by $4 million this year as nearly two-thirds of the defense contractor's employees embrace the company's Internet-based booking system.

Ellen Hanzl, Computer Associates' assistant vice president of corporate travel, said the full impact of the corporate travel revolution has yet to be felt.

"This is the wave of the future. I don't think it's a fad at all," Ms. Hanzl said. "The (cost-saving) tools are only going to get better."

Large U.S. companies have no plans to expand their shrunken travel budgets in coming months. For the struggling airline industry, which needs corporate travelers to open up their wallets again in order to fully recover from its worst downturn ever, these are not good signs.

J.P. Morgan airline analyst Jamie Baker said in a recent report that "a rapid rebound in business demand ... is unlikely to materialize."

Corporate travel managers say money-saving initiatives launched when the economy soured a few years ago are here to stay. They say employees are gradually getting hooked - with a little prodding from management - on new technologies for booking and communications. In addition, the expanding networks of low-fare airlines have made it more convenient for business travelers to fly them.

These changes are bound to curb the pace of the airline industry's nascent recovery. Still, airline executives and some analysts are optimistic the industry can build on its relative success this summer, when domestic flights were packed with leisure travelers, albeit at historically low fare levels.

Many analysts have narrowed their industrywide loss estimates for the third quarter. And while losses for the year could top $6 billion, airline stocks have risen sharply from historic lows a few months ago. Analysts expect third-quarter net profits from at least two major carriers: Continental and, as always, Southwest.

For most major carriers it is the impact of aggressive cost-cutting, not a huge revenue rebound, that is responsible for gradually improving bottom lines, analysts said.

Carriers have laid off more than 100,000 employees since the Sept. 11, 2001, terrorist attacks plunged the industry into its worst downturn ever. The number of available seats this summer was down about 5 percent from last year, and roughly 13 percent from 2001. United Airlines and US Airways wrung billions of dollars in concessions from employees in bankruptcy court, while American Airlines did the same to avert Chapter 11.

"Cost containment is No. 1," said John Heimlich, chief economist at the Air Transport Association, a Washington trade group.

Another reason for airlines to be cautious is that the multibillion-dollar federal program to reimburse airlines for security fees expires at the end of September. The reimbursements were worth about $7 for every roundtrip ticket sold.

The end of the federal-aid program comes at a time of year when the industry would traditionally get a boost from business travelers. But that is unlikely.

"There doesn't seem to be any move to expand (corporate) travel budgets," said Kevin Mitchell, chairman of the Business Travel Coalition of Radnor, Pa.

TXU Corp., a utility holding company based in Dalla, said its travel budget in 2004 would be flat or slightly higher. In 2003, the company slashed spending by 45 percent to about $7 million.

The large decline from 2002 was partly due to TXU's sale of European operations, but the company also has made reducing travel costs a priority. Like many companies, TXU is negotiating better bargains from travel agencies, airlines and hotels, and it has eliminated nonessential travel.

PerkinElmer Inc. plans to spend a little more than $30 million on travel and entertainment in 2003, down 40 percent from 2000, said Tom McCabe, director of global travel services for the Wellesley, Mass., maker of laboratory equipment.

The company has trimmed its travel budget each of the past three years, and Mr. McCabe said there is no sign of reversing course.

PerkinElmer is sending one employee instead of two or three when face-to-face meetings are absolutely necessary. As for the increased reliance on video- and Web-conferencing, Mr. McCabe said employees don't grumble about the technology's shortcomings as much as they used to.

"They're looking at it for what it is, an alternative to spending thousands of dollars," he said.


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