The weak economy has finally begun to hit corporate travel spending, with companies cancelling trips and pushing employees to fly on discounted tickets or stay in cheaper hotels. Wednesday, Northwest Airlines, citing a sharp decline in full-fare domestic business traffic, warned that it expects a steeper-than-expected loss of $130 million to $150 million in the current quarter. Delta Air Lines, UAL Corp.'s United and US Airways Group Inc. have also warned of weakening business travel.

"As companies are looking for ways to improve their bottomline, travel is a huge red flag right in front of them," said Ms Valerie Estep, president of Topaz International Ltd., a Portland, Ore., auditor of corporate travel spending.

Many companies have taken a surgical approach to travel cutbacks thus far, avoiding widespread slashing that's been the hallmark of downturns in the past. Corporate travel managers say companies have learned that staying home often exacerbates sales losses, hurts client relations and does more damage than good.

At Black & Decker Corp., unit heads sent out memos early this year asking employees to be more cost-conscious, said Mr Peter Buchheit, director of travel and meeting services for the Towson, Md., maker of power tools and home-improvement products. So far this year, the company's domestic spending on air travel is down about 20 per cent from last year, and international travel is down 29 per cent. "We have pretty aggressive initiatives in place to reduce the cost of air travel any way we can in light of the six business-fare increases last year," Mr Buchheit said.

At John Hancock Financial Services Inc. in Boston, lower-level employees are getting budget-conscious although there have been no travel restrictions put in place, said Ms Cathy Metzinger, a corporate travel consultant with World Travel Partners, which manages more than $10 million in travel a year for the company from an on-site office.

"The VIPs are still flying first class and not thinking twice about it," she said. "But some of the other agents are being a little more conscious of what they're booking." That includes staying over Saturday nights to get a lower fare, taking connections instead of non-stop flights and booking non-refundable, lower-priced tickets.

Others haven't cut back yet. A DaimlerChrysler AG spokeswoman in Detroit said the auto maker hasn't changed its travel policy. And Northwestern Travel LP, a big corporate-travel management company in Minneapolis, said it isn't seeing signs that business travel is plummeting. "At least half our clients' travel volumes are up," said Mr Art Dahl, Northwestern's president, although he noted that February figures weren't as strong as January's.

Even airlines are split on the extent of the penny-pinching. Northwest blamed the weakening US economy for a deterioration of its high-fare business, saying labor unrest wasn't a factor in its first-quarter outlook.

Domestic traffic in February fell 4.4 per cent on a 2.9 per cent decline in capacity, Northwest said on Wednesday. The airline expects domestic-unit revenue to grow by just 1 per cent to 2.5 per cent in the quarter, compared with a 4.3 per cent increase in last year's first quarter.

One sign that cutbacks haven't been all that dire is that record-high business fares haven't come down yet. The average domestic ticket, including corporate discounts, was $575 in January, up 3 per cent from $559 a year ago, according to Topaz. Analysts say Northwest, United and Delta are undoubtedly feeling the pinch of labour unrest, which has been driving customers to stable airlines like Continental. US Airways, too, is eager to win US Justice Department approval for its sale to United on grounds it is a faltering carrier in need of rescue.

As a result, the situation may not be as bad as it looks. "Clearly business travel has softened, consistent with a soft landing, not a recession," said Morgan Stanley's airline analyst Mr Kevin C. Murphy. But for airlines negotiating with labour this spring, big losses may work in their favour. "I think there is some posturing going on," Mr Murphy said.

Many strong hotel markets, such as New York, Boston, Chicago and San Francisco, have recently seen disappointing revenue per available room, a measure of room price and occupancy. Analysts note hotel companies haven't yet pulled back profit expectations as airlines have, but they are sure to follow.

"I don't think hotels have come entirely clean yet" about the extent of travel cutbacks, said Mr Jason Ader, an analyst covering hotels and leisure at Bear Stearns. "All the tech companies are saying one of the areas they're going to cut back is travel ... Corporations are very nervous."

The Wall Street Journal