Business cutbacks hit airlines hard

By Tim O'Brien
CNNfn

WASHINGTON (CNN) -- Few industries have been hurt more by the current downturn in the economy than the airline business.

Business travel is the lifeblood of the industry, but corporate America -- anxious to cut costs -- is taking aim at the high ticket prices. The resulting rebellion has put the airline industry in a tailspin.

High prices are routine for business travelers who often must travel at the last minute, and who seemed much less concerned about price than leisure travelers, until now.

"Business travel has declined at a rapid rate. This has been a cry that the corporations have been screaming for a long time -- that prices are too high," said Marianne McInerney of National Business Travel Association.

And today, they're doing more than just scream.

MORE STORIES Midway files for Chapter 11, cuts routes   Airlines struggle as business travel plummets     RESOURCES Sound Off: What is your idea of a 'working vacation?'

In a recent survey, 77 percent of U.S. companies responding said they are eliminating all but essential travel. The same percentage are also booking the lower-priced, advanced-fare tickets, many on discount airlines.

It is all contributing to make this what is likely to be the worst year ever for the big domestic airlines, which, by some estimates, will lose as much as $2.5 billion by year's end.

"Airlines are dependent on the business travel, they are dependent on the full-fare traveler. Without them, the system just doesn't work," said Raymond Neidl of ABN AMRO banking group.

To win back those precious full-fare passengers, United and American Airlines earlier this month cut fares to many of their larger markets and dropped the Saturday night stay requirement for cheaper fares. Other airlines may follow suit.

But some airlines are also cutting the number of flights to some markets and discontinuing some routes altogether, as Midway Airlines did earlier this week.