Up Front With Martin B. Deutsch



December 1, 1984 -- In the unlikely event that the reality hasn’t yet dawned, the esoteric and pervasive theme of this issue is The Best, an ambitious undertaking. Our copy-readers, burning with zeal and turned on by the scope of their assignment, put it this way: "A theme issue bringing the best of the world to Frequent Flyer readers." I think I wish I had said that.

In order to commence with the leavening process, to return to the day-to-day marketplace, so to speak, I will devote the next two columns to a discussion of the overriding issues facing the travel industry in 1985 and their possible impact on the frequent flyer. These cogent developments are isolated traditionally at the end of each calendar year by the editors of travel management daily, a sister publication for travel industry executives. I am hopeful that my colleagues at tmd will be generous with both my pilfering of their compilation and whatever liberties I take with it.

Wooing the Business Traveler. Probably the most intensive promotional battle ever waged for the loyalty of the business passenger has evolved from the early domestic airline frequent flyer plans into giant marketing alliances of hotel chains, car rental companies, cruise lines, commuter airlines and more and more international airlines. There is every reason to believe that he programs will continue to proliferate simply because they are effective in building repeat business for the participating companies. You need a personal computer to figure out which of the programs are best for you; and to choose your reward for the mileage you’ve accrued.

There is a cloud on the horizon, however, for these popular bonus programs. In September, an Internal Revenue Service spokesman said that IRS considers a free ticket to be taxable income if the frequent flyer is allowed to use the award rather than turning it over to his company. IRS has indicated that is has no plans to issue rulings on the subject, and that any action will come as a result of audits. The IRS position seems to be that mileage bonuses earned on company-paid travel belong to the company. Thus, they are viewed as untaxable volume discounts when used by the company. But when a company allows an employee to keep a ticket it becomes taxable compensation. Observers feel it will be "difficult if not impossible" for IRS to control frequent flyer bonus awards via tax audits. Stay tuned to the pages of Frequent Flyer for further developments.

Wooing Corporate Clients. While the suppliers are scrapping over the frequent flyers, the major travel agency chains and organizations are engaged in a bitter competition to handle the travel needs of the Fortune 500 corporations and other large company travel accounts. In the forefront of this campaign, one which hold clear financial benefits for your company, are American Express, Ask Mr. Foster, Thomas Cook, the Woodside Group and the Hickory Association. (The airlines and other suppliers of travel-related services are also involved in this high-stakes conflict.) Whereas many of the big companies previously relied on in-house travel departments or on a mix of different local travel agencies, they are now being asked to consolidate all their business into a single travel agency organization worldwide to bring about more efficiency and lower costs. In order to make themselves as attractive as possible, these travel agency groups need their own locations and/or affiliated agencies in as many cities and countries as possible. This has encouraged a spate or acquisitions and mergers which may well modify the face of the travel agency industry as we know it. And these rapidly expanding companies are wheeling and dealing in meaningful dollar terms with prospective clients.

The Airline Reporting Corporation. That’s the name of the new entity being created by the U.S. domestic airlines to restructure the travel agency distribution system. As the result of the Deregulation Act of 1978 ad subsequent probes by CAB, it was decided that the airlines had to open up the channels of ticket sales beyond the travel agent, who’s enjoyed virtual exclusivity until now. The carriers responded by creating ARC, which will permit tickets to be sold not only on standard ticket stock by what are called industry-wide agents, but also by other parties who will be able to write tickets on the stock of a single airline. Essentially what this revolutionary change will lead to—if the major airlines decide to take advantage of this new freedom—is sale of tickets from retail outlets other than existing travel agencies. This new look, which may be in place by January, could also lead to more liberties with the price of airline tickets and other travel services.

I would be remiss, if not delinquent, in any month where Frequent Flyer is preoccupied with The Best, if I did not pay tribute to the Best audience on the national magazine scene. Our reader is without parallel in his commitment to our editorial focus, his responsiveness to what we bring to him. The letters keep coming, day in and out, not just the quick note but incisive and thoughtful comments. We are most appreciative.

This year’s third annual Frequent Flyer Poll drew a record 15,000 plus responses, a staggering demonstration of interest and more-than-passing readership. But then, that’s really what you’d expect from an audience with an average annual household income of $109,300, a remarkable decision-making profile, and the sophistication brought about by the most awesome travel demographics in publishing history.

You are The Best. And all of us here at Frequent Flyer join me in wishing you and yours The Very Best for the holidays and the New Year. May 1985 be healthy, exhilarating and rewarding.

This column originally appeared in Frequent Flyer magazine.

Copyright © 1991-2007 by Martin B. Deutsch. All rights reserved.