Up Front With Martin B. Deutsch



March 1, 1986 -- Last January, this column capsulized several topics that had been featured in travel management daily’s annual report, "The Industry’s Top Ten Issues." And why not? This compendium, much-praised by travel industry executives and government leaders has attracted a serious following.

The newsletter is a sister publication of Frequent Flyer both being products of the OAG Travel Magazines Division. The man who selects the issues, does most of the research, and writes the report is Jim Glab, travel management’s managing editor. You can always count on the balanced, laid-back, middle-of-the-country view from him. He’s from Iowa.

Enough of your wrote letters last year, expressing opinions on several of the travel industry’s major issues, that I thought we should tackle a few times on this year’s report.

A number of the issues on Glab’s list have only a tangential impact on the frequent flyer: airline profitability, the emergence of travel agency chains, and continuing questions about computer reservations systems, for example. But others are as significant for the consumer as for the travel industry, including item number one on the list: Fear.

"As the new year begins the [travel] industry faces a deep undercurrent of consumer concern about the safety of travel," Glab writes. "While the strong dollar produced a 1985 bumper crop of overseas trips by Americans, a continuing series of terrorist incidents and air crashes has produced an atmosphere of apprehension in the market that started to show itself in declining international airline traffic and canceled tour bookings by the end of the year.

"This apprehension was fueled by intensive media coverage of such incidents [as] the hijacking of TWA and Egyptair flights and the Achille Lauro, as well as the crash of an Air-India 747 that was probably caused by a bomb. Moreover, a death toll of some 2,000 persons in air crashes last year added to the concerns of travelers about their safety. The final blow of the year—the terrorist attacks at the Rome and Vienna airports—led a top FBI official to warn that any American traveling overseas could be a target of such action, a statement that could do serious damage to the number of trips abroad in 1986. By the same token, the trend could also lead to a boom in domestic travel this year.

"By December, the Federal Aviation Administration had started ‘extensive and systematic’ safety inspections of every U.S. airline. Congress too was appalled by the hijackings and crashes, and with uncharacteristic speed, passed the Foreign Air Travel Security Act, requiring the Transportation Department to assess security at international airports and to warn those governments with unsafe airports to improve their security. If the airport doesn’t, then a travel advisory would be issued regarding the airport. Due to the Achille Lauro incident, Congress also started moving on similar legislation for maritime security."

Another item on this year’s list of ten top issues facing the travel industry was the topic of Frequent Flyer’s February cover story: Airline Consolidation.

"The latest phase of post-deregulation competition is marked more by the acquisitions than by shutdowns, and the airline industry now seems headed into a new stage of megacarriers," the report says. "On Wall Street, the past year was marked by actual and rumored takeovers, and the airline industry was no exception. Financier Carl Icahn jumped into the airline business as he beat out Texas Air Corp’s Frank Lorenzo for control of TWA. In other instances, financially weak carriers found themselves being gobbled up by stronger competitors: Pan Am sold off its Pacific Division to United; and Frontier sold half of its fleet to United…coming to the verge of bankruptcy before People Express bought the company out from under the nose of Lorenzo.

"Piedmont, the newest major carrier, bought Empire Airlines in the northeast and established a substantial intrastate operation in Florida; USAir bought Pennsylvania Commuter Airlines; and Southwest Airlines acquired regional competitor Muse Air…The outlook for 1986: the strong carrier will get stronger, with American and United leading the pack, as financially strapped airlines find it increasingly difficult to compete."

Yield Management, an airline industry term with profound implications for the frequent flyer, was the subject of another of the year’s top ten trends: "It’s the latest buzzword in airline pricing, and 1985 was marked by the refinement of the technique, although some carriers were more successful with it than others. It refers to the ability to price your product in such a way as to maximize revenue and load factor by selling as many seats as you can at the highest fares as you can get, and filling up the rest with incremental revenue.

"American started off the year with a new domestic fare structure based on these principles that was generally adopted by competitors, although competition being what it is, the number of exceptions to that structure quickly proliferated. Throughout the year there were continuing examples, and it became evident to the traveling public that cheapest fares could always be obtained if they traveled on a day at a time and over a routing that was the least convenient.

Two final items, under a discussion headlines "The Federal Budget," will be much on all out minds this year: a move by the House of Representatives to reduce tax deductions for meals and entertainment, and the Internal Revenue Service’s apparent intent to begin taxing frequent flyer bonus prizes.

Throughout 1986 our editors will be watching closely all these developments, to bring you reports on developments as quickly and as accurately as possible. In the meantime, let us know what you think about these and other issues facing frequent flyers as well as the travel industry.

This column originally appeared in Frequent Flyer magazine.

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