Chapter 11 won't bust airline budgets

By Published on .

Most Popular
Despite Delta and Northwest both heading into Chapter 11 bankruptcy last week, the nation's third- and fourth-largest carriers remain in the air and have no plans to cut their advertising and marketing budgets.

In fact, both reacted quickly. After the Sept. 14 filing, Delta took out a full-page ad the next day in Gannett Co.'s USA Today-costing roughly $94,000 before discounts, according to the paper's national rate card-and Northwest sent an e-mail to its frequent-flier members, both assuring customers they would operate normally during the bankruptcy proceedings.

"It's textbook," said travel expert Terry Trippler of CheapSeats.com. "The first thing they do is shore up the home front, and that's their frequent-flier members. It's a great marketing tool. In fact, what starts as the `everything is fine' message will probably be followed by an offer of a few thousand bonus miles if they travel before a certain date."

Just how long they can maintain spending is another matter.

When United went into bankruptcy protection in 2003, its advertising budget actually increased 17.5% from 2003 to 2004, according to TNS Media Intelligence. But other, albeit smaller, airlines cut their marketing costs in the wake of filing Chapter 11.

Northwest, which handles advertising in-house, has had a declining ad budget in recent years, dropping from $54.5 million in 2000 to $21.7 million last year. But Delta, despite a head-spinning collection of campaigns and agencies, has maintained a national presence. WPP Group's Ogilvy & Mather currently handles its account. The $42.3 million it spent in 2004 was fourth among all airlines. American was first with $66 million.

"Nobody is going to trash their budgets, but you'll see a shift in emphasis," said travel expert Joe Brancatelli, who runs the popular business-traveler Web site JoeSentMe.com. "The reset of the 2005 budgets will be devoted to tactical, as-needed response ads, be it for fare sales or whatever."

Delta and Northwest should maintain their place as top-five airlines. American has 17.4% of the U.S. market share, followed by United, Delta, Northwest and Continental.

"Over the long term, these legacy carriers still have the longer routes," said Mike Boyd, president of the Evergreen, Colo.-based aviation consultancy Boyd Group.

In this article: