London and back, just $198, but many fliers staying home

Airlines first casualty in buildup toward war

February 22, 2003|By Paul Adams | Paul Adams,SUN STAFF

In a scene being repeated in boardrooms and living rooms nationwide, Baltimore-based Black & Decker told its employees this week to reconsider any international travel plans.

The toolmaker's new guidelines were sent out as a potential war with Iraq draws closer, fueling anti-American sentiment overseas. Citing global tensions, a growing number of business and leisure travelers are ignoring unprecedented fare sales and electing to stay closer to home.

"Basically, we're encouraging employees to do only essential travel," said Peter Buchheit, director of travel for Black & Decker, which spent nearly $5 million flying employees abroad last year. "But we leave that determination up to them and their supervisor."

Much like what occurred at the time of the Persian Gulf war, airlines have become the first casualty in the United States' battle to disarm Saddam Hussein. International ticket prices reveal the severity of the industry's troubles.

"Right now, we're already seeing deals for June travel that are as much as $600 off where they were last year," said Tom Parsons, chief executive of Best- fares.com, an Internet travel site that tracks air fares. "That means airlines are probably going to lose their shirts."

British Airways calculates the price of courage at $198. That's how much the air carrier was recently charging for a round-trip flight between the United States and London, where soldiers were recently deployed to patrol Heathrow Airport in response to a terrorist threat. Parsons said other airlines matched the fare, and in some cases went a step further. In one example, Bestfares was selling trips from San Francisco to Munich, Germany, for $149 round trip this week.

"The price points [airlines] are giving me are just unheard of," Parsons said.

Baltimore travel agents see a mixture of good and bad news in the trend. Some have noticed that big-ticket trips to Europe have lost favor lately, while cruises and trips to the Caribbean and Hawaii are on the upswing. Either way, people are still taking vacations.

"You have your certain people who are afraid to travel, even to go down to Florida, and then you have your mixed bag of people who just don't want to travel to Europe," said Jay M. Ellenby, president of Safe Harbors Travel in Baltimore.

About 42 percent of the travel service's business is international. Ellenby said some business clients are waiting to see what happens in Iraq before booking overseas trips, while others are trying to beat the clock.

"Our international business in January was through the roof," he said. "The only thing we can determine from talking with clients is that they were trying to get it in before anything happens" in Iraq.

Things could get worse for U.S. airlines, which have lost more than $15 billion in the past two years. With bookings already off, analysts estimate that the industry could see demand for trans-Atlantic travel fall 10 percent to 20 percent if war breaks out. The decline would add to losses already suffered as a result of the anemic U.S. economy.

"The whole thing with Iraq is going to lead to a total and complete nervous breakdown of the airline industry," said Henry Harteveldt, a senior analyst with Forrester Research.

Airlines won't discuss bookings, but say they have contingency plans in place if demand drops drastically. Bookings fell about 10 percent during the last Persian Gulf conflict.

"We can only look at what happened during Desert Storm, and based on that, we expect to see a drop in traffic," said Todd Burke, a spokesman for American Airlines, the world's largest carrier.

Some analysts see the potential for a bigger drop this time around. During the last gulf conflict, air travelers didn't have al-Qaida to worry about. And all of Europe was on the U.S.' side, rather than protesting in the streets.

Even so, airlines aren't likely to suffer any long-term effects if the conflict is resolved quickly, Harteveldt said. If it drags on for weeks, however, it could be enough to push some airlines over the precipice.

"I don't think any airline will be completely untouched," he said.

The outlook was less bleak a few months ago, when some surveys suggested that a larger number of people were inclined to travel abroad this year compared with 2002. In a poll commissioned in December by Travelocity, the Internet travel site, 83 percent of respondents said they were at least somewhat likely to continue with travel plans despite the threat of war. The poll also found that 86 percent of respondents were likely to follow through with business travel plans.

The same poll found that 18 percent would cancel plans if the nation's terror alert was raised, and 16 percent said they would stay home if war broke out.

"We're certainly seeing that Europe is the most dramatically affected area in which we're seeing a real stagnation at this point," said Amy Ziff, the Web site's travel editor. "I expect that we'll continue to see periodic sales to stimulate demand."

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