Firms Looking for Alternatives on L.A.-S.F. Run : Some Cut Flights--One Has Even Moved Out-of-State--to Avoid Higher Air Fares
Edward Huseman rarely turns away business, but when he was asked to bid on a job in San Francisco recently, Huseman said no.
He said the work was not worth the $296 round-trip air fare to San Francisco from Los Angeles, where his company is based. “There just wasn’t enough profit in the job to justify a trip just to give a quote,” said Huseman, vice president of a lead foundry that makes marine ballast.
An informal survey shows that executives of many California firms plan to travel less this year, especially considering the steep intrastate fare hikes that went into effect Jan. 19. Many firms plan to shave costs by using special discount fares for group travel, and a few companies are taking more dramatic steps: One small Los Angeles manufacturer even plans to shift a sales office out-of-state to save on air fare.
But many company travel managers said most corporate travel was unavoidable and that the choice for many businesses is to pay the higher air fares or lose the customer. “We have to make calls on our corporate accounts,” Jack Hyatt, a vice president at Bank of America, said. “We can hunt around for a better fare, but we can’t stop flying.”
But Huseman said he must stop making some flights. He said his small firm, Keelco, will give up on potentially as much as $250,000 in Bay Area sales this year simply because it has become too expensive to fly there to call on possible customers. “These air fares are stifling trade,” he said.
Comes as a Shock
United Airlines initiated the mid-January hike by raising the unrestricted Los Angeles-San Francisco coach fare to $148 one-way from $129. The 15% fare increase was quickly matched by American Airlines, USAir and Alaska Airlines.
While raising fares, the airlines introduced a new $129 one-way fare that is available when the ticket is purchased at least seven days in advance. But that does not help some businesses very much because many business trips cannot be scheduled that far in advance.
United raised its fare between Los Angeles and San Francisco to match what it charges on other heavily traveled routes, United spokesman Joe Hopkins said. He added that between New York and Washington, United charges 45.8 cents a mile. With the West Coast fare increase, the cost for travel between Los Angeles and San Francisco is 43.9 cents a mile.
Even so, the increase is a shock to veteran California business travelers who paid significantly less to travel around the state just four years ago. Gordon Engerberg, manager of Ask Mr. Foster travel agency in Century City, said businessmen could traverse the Los Angeles-San Francisco corridor for just $39 in 1985. “That’s when PSA and AirCal were fighting for customers,” he says.
But in 1987, Pacific Southwest Airlines was bought by USAir and Air California by American Airlines. Since then, “we’ve seen a steady rise in fares,” Engerberg said.
He said he expects business travel along the heavily traveled corridor to drop by 10% to 15% as a result of the higher fares. But, he added, “I’m sure the airlines realize that, and expect the higher fares to more than make up for it.”
Last year, Chevron’s air travel expenses swelled by $5 million, largely because of higher air fares, said Nancy Godfrey, travel manager for the big San Francisco oil company. She said she expects to pay more this year, despite efforts to lower travel costs. “We like to think that 100% of our travel is essential. But the more fares go up, the more we have to look at it,” she said.
At Price Waterhouse in Los Angeles, accountants and consultants try to plan trips in advance to take advantage of the lower seven-day advance purchase fare, even though a penalty must be paid if the trip is canceled. “We’ve found we can cancel two of every three flights and still come out ahead using penalty fares,” said Carl Schwab, a partner in the travel management consulting group.
Other companies have looked for an alternative to air travel. Igal Levy, travel manager for MCI’s Pacific region, said the long-distance phone company has replaced some travel with teleconferences.
Moving Office
He recently interviewed job applicants for an opening in his department by using MCI’s teleconferencing system, in which people in distant locations can talk by using the telephone and see each other on a video screen. From his office in San Francisco, he interviewed applicants who wanted to transfer from MCI divisions in Chicago and Denver.
In addition, teleconferences have replaced quarterly meetings in some divisions, Levy said. “Instead of flying, we use video conferences.” By cutting air travel, Levy said, MCI’s Pacific division alone expects to save $2 million a year, about 15% of what it has paid for air travel in recent years.
Tru-Flex Rubber Products, a small Los Angeles manufacturer of parts for tires and conveyor belts, is moving its Sacramento sales office to Las Vegas, in part to take advantage of lower fares available from Las Vegas. “We can’t travel less. Travel is essential,” said Sheery Nottingham, who handles travel arrangements for the Tru-Flex sales force.
Besides moving the office, Tru-Flex asks its sales people to extend their sales trips to Saturdays to take advantage of discount fares that require weekend stays. Even though there are additional food and lodging costs, it is often possible for the company to come out ahead.
“We try everything we can,” said Nottingham. “It’s just crazy.”
