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Airlines Bring Back Saturday-Night Stays

CHARLOTTE, N.C. -- Saturday-night stay requirements for airline passengers seemed to die an unlamented death three years ago, but now, they're back.

Last week, three carriers, Continental (CAL), Delta (DAL - Get Report) and UAL's (UAUA) United disclosed that they have reinstated the deeply unpopular restriction in select markets.

Airlines view the Saturday-night stay rule a method to segregate leisure travelers from business travelers, who are willing to pay more to travel because their work demands it.

For passengers, however, the requirement is "exhibit A in how to turn off your best customers," says Kevin Mitchell, chairman of the Business Travel Coalition. "This and some other onerous charges are what got carriers in trouble with corporate travelers in the past," he says. "Hopefully, it's a short-term act of desperation."

The Saturday-night stay largely disappeared in January 2005 when Delta, facing intense competition from low-fare carriers, announced an initiative called SimpleFares, which reduced the highest business fares, eliminated Saturday-night stays and limited the number of available fares on each flight.

After AMR's (AMR) American followed, the rest of the industry joined in.

The shift altered decades-old pricing patterns, helping to trigger an increase in the number of airline passengers, as the industry moved to a new model of fuller planes and lower fares. Between 2004 and 2007, the number of U.S. airline passengers rose from 703 million to 765 million, according to the Air Transport Association.

But last week, Continental President Jeff Smisek said the carrier had reinstated Saturday-night stay mandates in certain markets in an effort to maximize revenue.

"We are taking actions to appropriately segment business and leisure travelers," he said. "We've been able to do this without any falloff in demand."

The change came in selected routes from New York and Houston, said Executive Vice President Jim Compton, who noted that in some cases Continental has also imposed three-day minimum stays in return for offering a low fare.

At Delta, "we've tried to keep the fares as flexible as possible while putting on restrictions that are consumer-friendly, yet revenue-maximizing," said Executive Vice President Glen Hauenstein, on a conference call. "We've put them on some fares, but we have kept the alternative of staying multiple nights at the same time."

Meanwhile, United Senior Vice President John Tague said his airline is "working very hard to segment the market where we can with minimum stays, Saturday-night stays, differential pricing between airports and a number of other tactics."

At the moment, use of the restriction is not widespread. At least one carrier, US Airways (LCC), hasn't added it anywhere. "I don't really see that happening across the industry," said President Scott Kirby, on a conference call.

Northwest (NWA) has added the requirement in some markets, while American says it has put the rule in effect on a limited scale.

In general, the carriers who have added the restriction suggest that when applied discreetly, it's part of a move toward more sophisticated yield-management efforts. In Mitchell's view, "It's probably used just in nonstop markets where demand is stiff and there are not a lot of other choices."

Historically, the restriction has forced business travelers to stay away from home longer in order to secure lower fares, says consultant Robert Mann. "If they make a comeback, it's time to go long hotel stocks," he says.

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