AirOptions Blog

Two recent corporate travel reports indicate that unbundled airline services and their corresponding fees are catching travel managers off guard and that few are measuring the financial impact of the added fees. Herve Sedky, an executive with American Express Business Travel’s Global Advisory Services, said the additional fees can boost air travel expenses by up to 15%. “We advise companies to consider increasing their focus on demand management to ensure planned trips meet the guidelines designed to promote the most effective use of their business investment,” Sedky said.

Despite a recent move to cut fuel surcharges on the most expensive tickets, almost 60% of domestic fares still carry the extra fee, according to an analysis by FareCompare.com. Domestic surcharges range from $10 to $260, with $170 being the most common. The average surcharge dropped as much as 10% from Sept. 22 to Oct. 22, but low- and mid-priced tickets saw no change.

Donald N. Martin & Co., a firm that tracks the performance of the nine leading trans-Atlantic airlines, estimates that U.S. visits to Europe will decline as much as 7% in 2008 compared with the previous year. “The worldwide credit and finance freeze, the loss of trillions of dollars in the markets and hundreds of thousands of jobs, and the prospect that the world faces one of its most severe recessions since World War II do not auger well for industries reliant on discretionary spending,” its report says.

When a travel expert gave a parody talk back in 2000 suggesting that employees hitchhike instead of fly and stay on friends’ and relatives’ couches instead of hotels while traveling, he likely had no idea that some of the jokes would become a reality in 2008. At a recent conference, an American Express executive said some corporate travel managers are indeed asking employees to stay with friends or family when traveling.

When the price of jet fuel hit record highs this summer, airlines scaled back routes and capacity and added fuel surcharges to counter their additional costs. The result has been a steady rise in airfares, and American travelers are now faced with paying as much as $1,000 to fly domestically in coach. “It’s going to be the tipping point that’s going to change travel,” said the president of Martin’s Travel & Tours in Los Angeles. She’s already had clients cancel their plans because of $1,000 tickets.

Delta Air Lines (DAL) completed its purchase of Northwest Airlines (NWA) Wednesday, hours after the Justice Department announced that the merger of two of the nation’s largest airlines will save consumers money without damaging competition.

The deal makes Delta the world’s largest airline, operating more than 800 large jets, employing about 75,000 people and producing about $35 billion in annual revenue. American Airlines, formerly the world’s largest by revenue, operates 635 large jets, has about 80,000 workers and about $23 billion in annual revenue.

Northwest shareholders will receive $9.99 a share in Delta stock, valuing it at $2.6 billion. Delta shares closed Wednesday at $7.99; Northwest’s at $9.90.

In a move that will be welcomed by many professional travel agents, California Attorney General Edmund G. Brown Jr. has sued YourTravelBiz.com for operating a gigantic pyramid scheme. The state alleges that YTB “recruited tens of thousands of members with deceptive claims that members could earn huge sums of money through its online travel agencies.” If found guilty, YTB could face fines and restitution as high as  $25 million.

 “YourTravelBiz.com operates a gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else,” Attorney General Brown charged. “Today’s lawsuit seeks to shut down the company’s unlawful operation before more people are exploited by the scam.”

Brown charges the company, its affiliates and the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen with operating an “endless chain scheme,” an unlawful pyramid in which a person pays money for the chance to receive money by recruiting new members to join the pyramid.

Brown also charges the company with unfair business practices and false advertising practices including  deceptive claims that members can earn millions of dollars with the company, operating without filing legally mandated documents with the attorney general and the Department of Corporations and selling an illegal travel discount program.

John Frenaye, a veteran agent and critic of YTB, said the state’s move was a “decisive win for travel agents and the travel industry” and could go a “long way to end the multilevel marketing challenge to the industry.” Last year, Frenaye collected more than 2,700 signatures from agents and suppliers opposing multilevel marketing.

In a statement, the attorney general said YourTravelBiz.com and its affiliates operate an illegal pyramid scheme that only benefits members if and when they find enough new members to join the scam. “Once enrolled, members who join the pyramid scheme earn compensation for each new person they enlist, regardless of whether they sell any travel. The company lures new members by offering huge income opportunities through online travel agencies, yet the typical person actually makes nothing selling travel.

 “According to company records, there were over 200,000 members in 2007 who typically pay more than $1,000 per year—$449.95 to set up an ‘online travel agency’ with a monthly fee of $49.95. In 2007, only 38 percent of the company’s members made any travel commissions. For the minority of members who made any travel commission in 2007, the median income was $39—less than one month’s cost to keep the website. There are at least 139,000 of the company’s travel websites, all virtually identical, on the Internet.”

YourTravelBiz’s extensive marketing materials include videos of people driving Porsches and other luxury cars, holding $10,000 checks and claiming to be raking in millions of dollars in profits. The company advertises through its Website, www.ytb.com, and at conventions, workshops and nationwide sales meetings that have been held in California locations such as Los Angeles, Sacramento, San Francisco and San Diego.

Under California’s unfair business practices statute, the company is liable for $2,500 per violation of law, the statement said. “Attorney General Brown is suing YourTravelBiz.com to get a court order that: Bars the company from making false or misleading statements and assesses a civil penalty of at least $15,000,000 and at least $10,000,000 in restitution for Californians who were ripped off by the company.”

The Attorney General’s statement also noted that from August 6 through 10, “thousands of members are preparing to travel to St. Louis for a national convention to learn new techniques to recruit more victims into the illegal pyramid scheme. Last year at least 10,000 people attended a similar national conference.”

For more information on pyramid schemes visit:     http://ag.ca.gov/consumers/general/pyramid_schemes.php
Any consumers who believe they have been bilked by YTB should send a written complaint with copies of any supporting documentation to:  Office of the Attorney General, Public Inquiry Unit, P.O. Box 944255,  Sacramento, CA  94244-2550. Or through an on-line complaint form:  http://ag.ca.gov/contact/complaint_form.php?cmplt=CL.

The Department of Homeland Security (DHS) has issued its Final Rule on Secure Flight, according to an alert provided by ASTA. This rule impacts all agents by requiring the airlines to collect a passenger’s full name, date of birth and gender. If this information is not provided, a boarding pass cannot be printed.

The rule It shifts the pre-departure watch list matching responsibilities from individual airlines to the Transportation Security Administration (TSA), which is one of the key recommendations made by the 9/11 Commission.  By bringing watch list matching responsibilities in-house, TSA hopes to reduce misidentifications when a traveler’s name is similar to one found on a watch list. ASTA filed extensive comments on the proposed rule, most of which were acted upon favorably in the final rule.

What this means to travel agents is that, when notified by the airlines (probably one at a time as they are transitioned into the Secure Flight program), agents will be required to collect for each passenger: 1) full name as it appears on the identification to be used to pass through airport security; 2) date of birth; and 3) gender. This information must be collected no later than 72 hours prior to the scheduled departure time. If the reservation is made within 72 hours of the scheduled departure time, it must be collected at the time of booking.

The new rule will begin with a soft launch in early 2009, at which point some airlines can begin forwarding domestic data to TSA. A full implementation of Secure Flight will begin around September 2009, when the program would assume, from U.S. Customs and Border Protection and the international air carriers, the watch list matching function for passengers on international flights.

Global distribution systems (GDS) have not yet announced procedures for travel agents to use when collecting the additional data elements. ASTA is working with the GDSs to obtain formats and will provide updates when new information is provided. Until then, agents should begin the process of updating customer profiles. If a traveler has a Redress Number, obtained from DHS following problems getting through security, this number should be collected as well.

ASTA said that it would provide a more detailed statement of the requirements and impacts of the new rules on agents business. “We will continuously monitor the implementation of Secure Flight and provide you with updates and practical suggestions as to how to deal with the program as efficiently as possible,”  ASTA said.

President George W. Bush recently announced that citizens from Estonia, Latvia, Hungary, Lithuania, Slovakia, the Czech Republic and South Korea will be allowed to visit the U.S. without a visa. The travelers will be required to register online and carry a biometric passport. Six other countries — Greece, Romania, Malta, Poland, Bulgaria and Cyprus — are in the process of qualifying for the program.

For the first time in his 23-year tenure at Southwest Airlines, CEO Gary Kelly said Thursday that the discount carrier plans to reduce capacity next year. Kelly said capacity would drop up to 6% in the first quarter of 2009, though no decision had been made regarding the rest of the year. Volatile oil prices and growing economic uncertainty have created “an environment where it makes no sense to be growing,” he told reporters and analysts during a conference call.