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Online services keep airlines aloft

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Airlines are turning to e-commerce to keep business flying as the economic slowdown and post-Sept. 11 security fears continue to ground many travelers.

Carriers are looking to the Internet to reduce the cost of sales and improve customer satisfaction. In addition to selling tickets over the Internet, they’re using special Web and e-mail promotion pricing to keep seats occupied. They’re also setting up electronic services to notify customers of delays via the Web, e-mail, pagers, mobile phones and PDAs, and they’re providing travelers with the convenience of self-service check-in, both at airport kiosks and over the Web.

In one of the major Web initiatives to date, United Airlines on March 25 announced plans for an air-travel contract management system called Corporate Solutions. The system allows companies that arrange business travel through United to generate contracts and track performance. The carrier said the program would boost its market share and financial performance, improve customer communications and reduce administrative time.

United would not comment on when Corporate Solutions would go live or provide specific details about the program. Information systems consultant the Prism Group is providing the technology for the system.

Air travel miles declined 10.7% year-over-year in the first quarter, according to the Air Transport Association. But the Internet has been a bright spot in the generally gloomy picture, said Forrester Research analyst Henry Harteveldt.

"The Internet is the saving grace for the airline industry," Harteveldt said. "If they did not have this technology, it is likely the economic impact would have been substantially worse to this heavily decimated industry."

Record sales

Kevin McKenna, managing director of electronic marketing for Continental Airlines, agreed, noting the carrier has seen record ticket sales over its Web site this year. First-quarter sales over the site totaled about $145 million.

Continental is awarding generous bonus miles for purchasing tickets online. Other airlines, including Alaska Airlines, are pushing online-only discounts.

The reason airlines are focusing on selling tickets through their Web sites is simple: It’s the cheapest distribution channel. It costs a carrier about $6 to sell an e-ticket via its Web site, compared with $21 for a phone sale and $20 or more for a sale through an online or brick-and-mortar travel agency, Harteveldt said.

Moreover, online discount travel services, such as Priceline and Hotwire, allow airlines to dump excess inventory. They can use these channels, along with their own online specials, to drive traffic to less-popular routes, such as flights with inconvenient connections.

"It’s like the early days of the automated teller machines," said Alaska Airlines CIO Robert Reeder. "Once people get used to doing business with airlines online, they’re not going to go back. It’s clearly the best way to do business."

Southwest Airlines generated 40% of its passenger revenue from its Web site last year, up from 30% in 2000, said Melanie Stillings, manager of interactive marketing for the carrier.

People turn to the Internet for better deals and because they’ve come to trust the Internet more since Sept. 11, when many turned to it for up-to-the-minute news, Stillings said.

"People developed some sense of affinity to the Internet as a whole to get information at their fingertips," she said.

Everything online

Alaska Airlines has revamped its Web site to enable customers to do everything online that used to require a phone call, including changing seat assignments and getting refunds. The changes have been made to match features available through online travel agencies such as Expedia, Travelocity and Orbitz.

At Continental, customers can even check in via the Web and print out their boarding passes. And some carriers, including United Airlines, provide kiosks at airports to allow passengers to check themselves in.

Such services are welcome changes for business travelers. "You don’t have the frequent flier tapping his foot while the agent is helping Aunt Tillie with the one-time trip to Topeka," said Forrester’s Harteveldt.

Airlines are also using electronic channels to keep business travelers informed of potential delays and schedule changes. "They’re the ones most affected by delays and miscalculations," said Rob Robless, chief technology officer for loyalty services for UAL, the parent company of United.

United recently instituted a program called EasyUpdate, which allows customers to be notified of schedule and itinerary changes through their choice of devices—phone, e-mail, Web, pager or voice mail. They can also designate a third party, such as an administrative assistant or spouse, to receive the updates, Robless said.

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