Under new rivalry, airlines woo customers to 'go steady'

Selling the airlines to the American consumer isn't done the way it used to be. ''Under regulation, the competition was in service - who offered the best food, entertainment, comfort, and schedules,'' says William Gregory, editor of Aviation Week & Technology magazine. With government control over routes and fares, there was little else to compete in, he explains.

Since deregulation, airlines have had to behave more like retailers, airlines say.

''Corporate advertising has moved to retail advertising,'' says USAir's senior vice-president of marketing, Randall Malin. ''We aren't saying, 'We're USAir, we're great, fly us.' Now every ad done highlights schedules and price, instead of image.

''Last year we did a little corporate advertising,'' Malin said. ''Once we saw what kind of year it was going to be, we stopped.''

The last three years have seen intense competition for domestic airlines. With recession cutting back travel budgets, over capacity in many routes, and competition from new entrants, the key selling point is now price. If there is a lowest fare out there, competitor airlines are inclined to meet it.

''There is nothing more important to the masses than price. That's why you've seen the shift in advertising from service . . . and our price will be as good as anyone's,'' says W.G. Kaldahl, senior vice-president of airline planning for American Airlines.

Delta Airlines, which tried to hold off on participation in the various fare wars, finally took the plunge early last year. ''We put forth a campaign stating we would not be undersold. But in mid-1982 we restricted the amount of discount seats to improve yield.''

According to analysts, there was no avoiding it. Delta is back to ''meeting or beating all major fares,'' says Joseph Cooper, senior vice-president of marketing. ''As compared to service and comfort, price is foremost in the passenger's mind these days.''

Heavy discounting is going on in areas of overcapacity, such as transcontinental and north-south routes. But don't look for cut rates to states like Minnesota or Montana - ''no excess capacity has put pressure on fares there ,'' says David Kaplan, a Civil Aeronautics Board economist.

Many airlines involved in the most serious fare wars admit the rampant price slashing doesn't cover the cost of running those flights. But the alternative, they say, is empty seats.

Either fewer airlines flying those routes, or more passengers traveling, will end the wars, analysts and airline executives reason. But neither is happening. ''Carriers are hanging on more than they should in a down economy,'' says Neil Effman, senior vice-president of airline planning at Trans World Airlines.

Although price is the main marketing ingredient, service hasn't been completely thrown to the winds. Once the airlines have matched one another's prices, the marketing circle has to wind up at service again.

Delta and United advertise the comfort, roominess, and fuel efficiency of their new planes. TWA touts its Ambassador business class on transcontinental flights - almost as good as first class (you still get meals served on china) and fares only $10 to $30 more than coach. Muse Air, a relative newcomer, based in Dallas, is proud of its leather seats and no smoking throughout the plane.

But in the last year and a half, one marketing tool has taken off: the frequent-flier programs. With recession knocking the leisure traveler out of the picture, ''We've targeted the business traveler,'' says Charles Novak, spokesman for United Airlines. ''They've declined (in numbers), but they still take trips.''

Alfred Norling, an analyst with Kidder, Peabody & Co., says the airlines don't provide analysts with the kind of information that would show whether the programs pay for themselves. But the airlines insist the programs help. ''This is not a trendy type of thing but a solid marketing program which gives brand loyalty,'' Mr. Novak said.

Not all programs are the same. For instance, some airlines computerize their programs to keep track of flier miles. Although the major carriers have been the ones to offer the programs, smaller ones like Frontier and Midway are now turning the idea over. Here is a brief ''shopping'' list for comparison:

American: Based on miles flown in a specified period. At 12,000 miles: a one-time upgrade to first class, Hyatt Regency room upgrade to suite, free Hertz rental, and Holland America Cruise Line cabin upgrade. At 20,000 miles: 25 percent off any round-trip ticket. At 50,000: free first-class round trip plus first-class upgrade for companion. At 75,000: two first-class round trips to most American destinations (Hawaii is popular). Free hotel rooms and car rentals included. Also, buy one cruise, get one free. At 150,000: along with plane, car, and hotel awards, free Acapulco-to-San Francisco cruise for two.

Continental/Texas International: Based on miles flown. Can pick up extra miles from New York Air and commuter lines, and by using National car rental and Hilton hotels. At 7,000: free three-day weekend rental from National car rental. At 40,000: free round trip, including Mexico. At 70,000: two coach round trips. At 125,000: two first-class round trips to Hawaii, South Pacific, or Micronesia, one week in Hilton, one-week car rental.

Delta: Based on number of segments. A flight is one segment; so is a stay at a Marriott or a car rental from Alamo or Avis. At 10 segments: first-class upgrade. At 20: 25 percent discount. At 30: 50 percent discount one way or round trip or one-year membership in airport club. At 40: one coach one-way trip. At 50: first-class one-way or round trip.

Eastern: Prize levels every 10,000 miles beginning at 10,000 and ending at 100,000 miles. Program good through Dec. 31 and prizes include upgrade to first class, free first-class or coach round trips (at 40,000 miles), airport club membership, free car rental, or 50 percent discount on a seven-day vacation. Comming soon: free international trips.

Northwest Orient: Based on trips flown. Fly 10 one-way segments on flights costing $100 or more, get free trip anywhere in continental US. More segments can qualify for Hawaii and international flights.

Pan Am: Based on miles. At 10,000: seat upgrade. At 100,000: pass anywhere on Pan Am for 30 days. At 175,000: two first-class, month-long passes. Special bonus: three transcontinental trips get free London trip. Can trade mileage for rooms at Sheratons.

Republic: Based on miles. At 12,000: free round trip and upgrade to ''business class.'' At 60,000: free one-year membership in Republic travel club.

TWA: Based on miles. At 10,000: upgrade to first class. At 50,000: free first-class round trip. At 60,000: two free economy tickets to any international destination.

United: Based on miles. At 10,000: seat upgrade, Avis rental car upgrade. At 20,000: 25 percent off a round trip, a Westin Hotel room, Avis car rental. At 50 ,000: free first-class round trip in US/Canada and seat upgrade for a companion. Special bonuses from time to time.

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