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Mail Tribune Business News
August 21, 2006
New security measures that followed the foiled terror plot have increased the volume of checked luggage, as well as the cost of plane tickets. (photos.com)

Cost of air travel will rise to fund the implementation of security measures

VIENNA, Austria — For business travelers, security measures that followed the exposure of an alleged plot to destroy airplanes over the Atlantic ushered in a painful scenario: flights without readily available bottled water, no duty-free gifts for friends and associates and grueling journeys without a John Grisham novel from the airport bookstore.

Some of those restrictions have been relaxed, such as the one on books, but many remain.

Now comes the news that passengers, already deprived of their usual distractions, will have to pay more to endure their boredom. On Friday, UAL Corp., the parent of United Airlines, announced hikes in most business fares — $5 for one-way trips and $7 for round trips in the United States. The No. 2 U.S. carrier said the increases apply to its first-class seats and all seats booked seven or fewer days before the flight.

Travel experts say ticket costs will go up to offset the cost of new security. Some trans-Atlantic passengers will have to buy new bags to meet new carry-on requirements. And new rules limiting what may be sold at duty-free shops could have the effect of raising prices on other goods to make up for lost sales.

"There will certainly be costs with any procedural changes associated with this current threat," said Michelle Petrovich, a spokeswoman for GLOBAL, a worldwide risk management company based in London.

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So far, the highest costs have been borne by the airlines. In the first eight days after the attack, British Airways, the largest carrier in the world, was forced to cancel 1200 flights, 22 percent of its itinerary, according to a spokesman. Many other flights were delayed and some travelers (the totals will not be known for some weeks) will decide to forego planned trips and request their money back.

Security is handled by airport authorities, but the costs are passed on in the form of landing fees for airlines and rent for airport retailers. On Thursday, the British Airport Authority said it had begun to hire more staff to cope with heightened security requirements.

Airline industry analyst Andrew Fitchie at British brokerage house Collins Stewart estimated the cost to British Air at about $100 million; the cost to EasyJet at $20 million and to Ryan Air at $4-$5 million. The latter two are budget airlines.

In Germany, Lufthansa Chairman Wolfgang Mayrhuber said in a newspaper interview that it would increase airline costs between $4 to $5.20 per passenger. "You can safely assume that the costs will rise sharply," said Mayrhuber in an interview published this week in the Frankfurter Allgemeine Zeitung.

But longtime watchers of the travel industry note that it is resilient, judging from recent experience.

"The rebound of travel and tourism is faster and faster. It took three years after Sept. 11th to get to where it was on the 10th of September 2001," said Jean-Claude Baumgarten, president of the World Travel and Tourism Council, based in London. "It took one month after Madrid to get back to normal and six months after the London terror attacks last year. It's very interesting. It shows that broadly speaking the consumer has integrated the fact that the security threat is here to stay and they are willing to live with it."

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Also affected will be duty free shops, although it is too early to say to what extent. Earlier this week at Heathrow, the duty free and retail shopping area was deserted. Even bookstores, which usually do a brisk business in Harry Potter, John Grisham and John Le Carre thrillers were empty or had only one or two passengers longingly looking at books, but not purchasing them thanks to a ban on bringing books on board. The ban officially had ended, but the word had not yet reached all check-in counters. Other shops had not even bothered to open in the early morning.

Unlike in the United States, international airports in Europe and the Far East often contain expansive malls, many stocked with luxury goods, cameras, computers and designer clothes.

Worldwide sales of duty free shops totaled $27 billion in 2005, according to industry-tracker Group Generation, with alcohol, cosmetics and perfume representing 50.5 percent of total sales.

For now, however, liquids (alcohol or perfume), cosmetics in the form of creams or gels or toners are forbidden on international flights bound to the United States and domestic flights within the United States. Elsewhere, liquids, creams and gels can be brought on board but only if they are purchased in the duty free area; they can not be brought through security, according to the British Airport Authority.

Operators of duty free stores say they expect the rules to reduce their profits but note that because their shops play a crucial role in airport economics, there will be an incentive to find a way to accommodate consumers and merchants.

One option is to put the purchased goods in the cargo hold and have passengers claim them with their baggage, several experts said.

But travelers might not want expensive items banging around in the hold where they can be damaged or stolen.

These limitations can spawn new business opportunities: luggage designers have lines of carry-on bags. Those probably will be redesigned once new size restrictions are set.

And the private security business, which has mushroomed in recent years, could see a boon in consulting fees. They have begun to analyze airport needs in light of this latest attack.

Petrovich, the spokeswoman for London-based GLOBAL, which manages the Baghdad airport, said that the airport authorities should consider turning to professionals such as those at security companies, which hire personnel with counterterrorism expertise.

And business travelers should get used to new security measures.

"Aviation will always be an interesting target to them (terrorists) because they've been successful," she said.

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Times special correspondent Elisabeth Penz contributed to this report.

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