PERKS POWER BUSINESS CLASS;U.S. AIR CARRIERS FINALLY EMBRACE SEGMENT

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Domestic airlines are allocating already-scarce seats and dangling new perks in accelerating efforts to promote business class.

U.S. carriers have only recently realized the potential of business class, something that international airlines have known for years. The result is a restructuring of everything from cabin interiors to concourse design to marketing that attracts the increasingly lucrative full-fare business traveler.

The business-class flier squeezes in at a price point below first class but above full-fare coach. Since its U.S. introduction in the late 1980s, business class has grown to the point where it now generates 16% of domestic travel dollars, said Barbara Beyer, president of Avmark, an Arlington, Va.-based aviation consultancy.

Estimated U.S. business class revenue reached $1.1 billion for the first quarter, or 10.4% of the total market, according to BACK Associates, Stamford, Conn.

"It's a real marketing success by the carriers," Ms. Beyer said, though she added that the category is getting crowded.

"Virtually every airline that considers itself full-service is experimenting with services for the high-use business passenger," said Eric Friberg, director of the Atlanta office of McKinsey & Co., a management consultancy that has worked with airlines hoping to attract business customers.

The efforts have become especially keen as airlines realized that corporations are cutting travel budgets and are forcing employees to travel on less expensive full-fare coach tickets, Mr. Friberg said.

For airlines, business-class service represents a way to tackle two tasks:

It offers high frequency travelers a cheaper alternative to first class, a category underused by travelers and one from which airlines derive only about 3% of revenues despite "huge allocations" for onboard service and space, Ms. Beyer said.

Business class offers a way to reward full-fare passengers by separating them from leisure travelers and making them feel as though they're getting their money's worth, she said.

With travelers already enduring sardinelike conditions in the air, some carriers have resorted to identifying business class with perks other than specially allocated seats. Such benefits include express check-in, seating priority, reserved overhead baggage space and meals served and retrieved first. Another "hassle free" service fast on the rise is electronic "paperless" ticketing (AA, Aug. 14).

As competition rises, so too will the perks, Mr. Friberg said.

Continental Airlines has instituted 55-inch-wide sleeper seats in its "Business First" program-seating once limited to international business class. The Richards Group, Dallas, is providing TV and print support in the Northeast.

"Our business travel is up," said Dave Messing, director-public relations. "We are selling more full-price tickets as opposed to the Continental Lite product last year, which focused on the lowest fare possible."

USAir in January instituted a new "Business Select" program on 200 daily flights to 16 East Coast cities. The program uses a system that turns three-across seating into two seats, and uses expandable curtain bulkheads that can increase business-class seating from four to 45 seats, said Richard Lesman, director-marketing programs.

Planes can be adjusted by the flight crew, and are offered on high-use, short-haul runs between Boston, Baltimore, New York and Philadelphia to Northeast and Midwest destinations of less than 2 hours, he said.

Ad support from Earle Palmer Brown, Bethesda, Md., includes print, radio and outdoor. Response from pre-launch tests and passenger surveys of the program has been positive, Mr. Lesman said.

At American Airlines, onboard amenities for business travelers began in February 1992. American's "Executive Coach" flights on routes from Chicago to California and the Northeast have rewarded passengers with pre-boarding, reserved overhead bins, meals served and picked up first, and an attempt by flight attendants to keep middle seats open to allow for more space, said Patrick O'Keeffe, managing director-marketing planning and consumer research.

In addition, American has "Executive Centers" in its Chicago and New York hubs, offering private meeting rooms, desk space, telephones and secretarial, facsimile, courier, limousine and catering services.

Temerlin McClain, Irving, Texas, is providing print and TV ads.

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