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May 18, 1997


Less Flying Up Front Means Fewer Ego Trips

By DAVID J. MORROW

Roger A. Enrico, the chief executive of Pepsico, can do it anytime he wants. Ann D. McLaughlin, the former Labor secretary, not only does it, she occasionally has General Motors pay for it. Chris Evert won't say whether she does it. And at IBM, managers can do it only if they are going to do it for a long time.

So what's this deadly sin?

Flying first class.

With companies slashing travel budgets in recent years, executives who once flew first class are now routinely sequestered in the rear. The exodus has made the first-class ticket one of the last perks of corporate success, on a par with country club memberships and access to the corporate jet.

"Being able to sit up front is the last sign of achieving high rank in the company," said one director in the Amdahl Corp.'s London office, who spoke on condition of anonymity. "It's a form of segregation, really. Your boss is in front and you're in the back. It causes a lot of frustration. Some executives in our company, when they hear they can't fly first class, get so annoyed they won't even take the trip."

Such fragile egos may have cause to be upset. Restrictions on first-class air travel have not only been swift; they have even lassoed chief executives and their boardroom colleagues. In 1988, according to a survey by Runzheimer International, a business travel consulting firm, only 23 percent of American companies that allowed employees to fly first class placed limits on which employees could do so. By last year, that number had climbed to 41 percent.

The carnage in the executive suite was just as severe. In 1988, 59 percent of top officers -- chief executives, presidents and the like -- at companies in the survey had special travel perks including first-class tickets and rooms at luxury hotels. Only 48 percent still had such perks last year.

The loss of privileges is part of a drive by corporate boards to bolster their companies' stock prices. The idea is to slash expenses, thus giving a lift to earnings and impressing Wall Street's fickle analysts. The strategy has worked: many companies have been notching record earnings, and the bull market in stocks has roared ahead.

"Our executives only fly first class on rare occasions," said John Hoey, vice president of Sylvan Learning Systems in Baltimore, an education services company. "We don't want our shareholders to be unhappy with us. First-class air fare, country club memberships -- those things sound really extravagant. There are better things we can invest our money in."

Corporate America's move to save bucks hasn't depleted the world's first-class cabins, but it has made a dent. First-class travel accounted for 10.8 percent of all international tickets sold in 1993 to corporate clients, but only 6.3 percent last year, according to Topaz Enterprises, a travel auditing and consulting firm in Portland, Ore.

Much of the decline can be traced to the growing popularity of business class -- which has many of the amenities of first class and now accounts for 35.7 percent of all tickets sold to companies, according to Topaz Enterprises -- and the airlines' push to capitalize on it.

Several airlines recently reconfigured their jets, taking seats from first-class cabins and adding them to business class -- making first class holier turf.

Few people have wallets deep enough to buy admittance into first class. A first-class round-trip ticket on United's flight from Newark to London, for example, goes for $7,845 -- enough to pay your child's tuition at Stanford for one quarter. A ticket for that flight in business class, which United calls Connoisseur Class, costs $4,959, while unrestricted coach fare is $1,333.

Despite the high prices, first class is not considered a profit generator by most airlines, according to Wall Street analysts, in part because many first-class passengers, using upgrades from frequent-flier programs, don't pay for the privilege. But Brian Harris, an airline analyst at Lehman Brothers, said first class had "a subtle but powerful impact on airline revenues."

"The correct way to look at first-class service," he said, is as "a place to upgrade business travelers." That builds brand loyalty.

Many people who pay for first class are celebrities, who would rather die than slum in public; top-ranked corporate officers, mostly from large companies, and some sales department stars, who bring in so much money for a company that they demand -- and get -- anything they want.

Filling up the rest of the cabin, however, are frequent fliers who have earned coupons to move up to first class at little or no extra cost. It's not that they are extremely welcome in first class; airlines would love to fill those seats with full-fare passengers.

And many well-heeled travelers, who are pros at the art of eating caviar, can spot impostors three aisles away.

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