Flight Fees Take Off on Threat
For business travelers, security measures that followed the exposure of an alleged plot to destroy airplanes over the Atlantic ushered in a painful scenario: flights without readily available bottled water, no duty-free gifts for friends and associates and grueling journeys without a John Grisham novel from the airport bookstore.
Some of those restrictions have been relaxed, such as the one on books, but many remain in place.
Now comes the news that passengers, already deprived of their usual distractions, will have to pay more to endure their boredom. On Friday, UAL Corp., the parent of United Airlines, announced hikes in most business fares -- $5 for one-way trips and $7 for round trips in the United States. The No. 2 U.S. carrier said the increases apply to its first-class seats and all seats booked seven or fewer days before the flight.
Travel experts say ticket costs will go up to offset the cost of additional security. Some transatlantic passengers will have to buy new bags to meet new carry-on requirements. And new rules limiting what can be sold at duty-free shops could have the effect of raising prices on other goods to compensate for lost sales.
“There will certainly be costs with any procedural changes associated with this current threat,” said Michelle Petrovich, a spokeswoman for Global Strategies Group, a risk management firm based in London.
“Aviation carriers and passengers and airports will face them. There will be needs for additional technology, greater need for insurance, a way to deal with canceled flights, fewer purchases in duty-free,” she said.
So far, the highest costs have been borne by the airlines. In the first eight days after the event, British Airways, the largest carrier in the world, canceled 1,200 flights, 22% of its schedule, according to a spokesman. Many other flights were delayed, and some travelers (the totals will not be known for some weeks) will decide to forgo planned trips and request their money back.
Security is handled by airport authorities, but the costs are passed on in the forms of landing fees for airlines and rent for airport retailers. On Thursday, the British Airport Authority said it had begun to hire more staff to fulfill heightened security requirements.
Industry analyst Andrew Fitchie at British brokerage house Collins Stewart estimated the cost to British Airways at about $100 million, the cost to EasyJet at $20 million and to Ryanair at $4 million to $5 million. The latter two are budget airlines.
In Germany, Lufthansa Chairman Wolfgang Mayrhuber said in a newspaper interview that the carrier would increase fees by $4 to $5.20 per passenger. “You can safely assume that the costs will rise sharply,” Mayrhuber told the Frankfurter Allgemeine Zeitung.
“We have to transport a lot more luggage in the hold and implement double checks. That can easily add up to three to four euros per passenger,” Mayrhuber said. “For many airlines, that’s 60% of profits.”
But longtime watchers of the travel industry note that it is resilient, judging from recent experience.
“The rebound of travel and tourism is faster and faster. It took three years after Sept. 11 to get to where it was on the 10th of September, 2001,” said Jean-Claude Baumgarten, president of the World Travel and Tourism Council, which is based in London. “It took one month after [the Madrid train bombings of March 2004] to get back to normal and six months after the London terror attacks last year. It’s very interesting. It shows that, broadly speaking, the consumer has integrated the fact that the security threat is here to stay, and they are willing to live with it.”
Financial analysts similarly note that over the long term, costs tend to be absorbed and redistributed. “It will all broadly balance out,” said Fitchie of Collins Stewart.
Also affected will be duty-free shops, although it is too early to say to what extent. At Heathrow one day this week, the duty-free and retail shopping area was deserted. Even bookstores, which usually do a brisk business in Harry Potter, John Grisham and John le Carre, were empty or had only one or two passengers longingly looking at but not purchasing books, thanks to a ban on bringing them on board. The ban had officially ended, but the word had not yet reached all check-in counters. Other shops had not even bothered to open in the early morning.
Unlike in the United States, international airports often contain expansive malls in Europe and the Far East, many stocked with luxury goods, cameras, computers and designer clothes. Displays of silk scarfs by Hermes hang next to luggage from Porsche and crystal glasses by Riedel.
Worldwide sales at duty-free shops totaled $27 billion in 2005, according to industry tracker Group Generation, with alcohol, cosmetics and perfume representing just over half of sales.
For now, however, liquids (alcohol or perfume) and cosmetics in the form of creams, gels or toners are forbidden on international flights bound for the United States and domestic flights within the country. Elsewhere, liquids, creams and gels can be brought on board if they were purchased in the duty-free area. They may not be brought through security, according to the British Airport Authority.
Operators of duty-free stores expect the rules to reduce their profits but note that because their shops play a crucial role in airport economics, there’s an incentive to find a way to accommodate consumers and merchants.
“After Sept. 11, there was a real impact on some of those payments. Travel just stopped in lots of places and the airports without those revenues had to pass it on as higher landing fees to the airlines, and that’s much more so in other parts of the world than in the United States,” said Michael Payne, executive director of Washington, D.C.-based International Assn. of Duty Free Stores.
One option is to put the purchased goods in the cargo hold and have passengers claim them with their baggage, several experts said.
However, travelers may not want expensive items banging around in the hold, where they can be damaged or stolen.
“We also think that this is just a temporary measure, because they certainly can’t let people run around with plastic bags,” said Fritz Janach, the director of Travel Value Wien, which runs the duty-free at Vienna’s airport.
“Imagine somebody with a Louis Vuitton bag that they take away from him and just throw inside a plane,” said Janach, suggesting that such policies were unlikely to last.
However, these limitations can also spawn new business opportunities. Luggage designers already have lines of ‘carry-on’ bags. Those will probably be redesigned once new size restrictions are set.
And the private security business, which has mushroomed in recent years, could also see a boon in consulting fees. It has already begun to analyze airport needs in light of the latest incident.
Petrovich of Global Strategies Group, which manages the Baghdad airport, said airport authorities should consider turning to security companies, which hire professionals with counterterrorism expertise.
She noted that the items people usually take aboard planes for safekeeping -- jewelry, electronics, small pieces of art -- can easily be stolen if they are put in the hold.
“Passengers are potentially putting their belongings at some risk. You have to consider that insider threat,” Petrovich said.
And business travelers should get used to new security measures. “Aviation will always be an interesting target to [terrorists] because they’ve been successful,” she said.
Special correspondent Elisabeth Penz contributed to this report.