BUSINESS TRAVEL BUYER’S HANDBOOK 2017 AIRLINES www.businesstravelnews.com Working With Airlines II. GATHER INFORMATION Proper data can help you win discounts for city pairs, multiple destinations from one city, regionally or across your travel program. A. Obtain information about your travel program from your TMC databases, online booking systems and third- party data consolidators: 1. Top 20, at least, city pairs by segment and passenger count, including car- rier and origin and destination data. 2. Carrier spend per airline per route for the most recent 12 months. 3. Tickets and value per class of ser- vice, including full-fare economy, discounted economy, business class and first class. Know the tradeoffs in using booked, ticketed or flown data. AFTER A WAVE OF MAJOR U.S. AIRLINE CONSOLIDATION AND THE CONTINUAL While bookings data is available growth of airline alliances and joint ventures, business travel buyers today have fewer more readily and with less of a lag, it avenues to negotiate airline deals than existed a decade ago. Certainly, that doesn’t help does not have the same precision as buyers negotiating position, nor does a market where demand and load factors continue ticketed or flown data. to increase worldwide. But business travel remains a lucrative and desirable segment 4. Analyze corporate card data to find for carriers the world over, given the possibility of premium-class and other high-yield trips booked outside your TMC. travel, and airlines still will heavily compete for that business, despite the leverage that Airlines do not count those trips consolidation has delivered to them. Organizations with established airline programs toward the volume you agreed in that can prove compliance and an ability to deliver share will be in the best position to your contract to provide, but the receive those deals, and the following is a guide to help buyers develop one. volume does add to your negotiat- ing power, particularly if you’re able I. BEFORE YOU COMMIT to articulate actions you’re taking to Most corporate discount deals are measured on market share, but buyers can gain leverage minimize leakage. if they have high-yield spend like first or business class or full-fare coach available to shift B. Investigate government and indepen- to new suppliers. Airlines also desire discounted economy or lowest-logical-fare business, dent information on airlines. Perhaps providing it’s business the carrier would not receive without offering discounts. Considering an airline has low load factors on a that suppliers are consolidating, commit only to share you can manage. Many companies route your travelers fly frequently, or overcommit, and then underperformance puts programs at risk. Discount programs are perhaps another carrier has launched structured based on opportunities. Consider a few hundred thousand dollars as a minimum service on the route, allowing you to for the U.S. point of sale, though your agency can provide more exact benchmarks. If your negotiate aggressively. Be aware of volume does not meet the minimum, look into revenue- or sector-based incentive pro- airline customer service metrics. Some grams for back-end rebates, club passes, waivers and favors, upgrades and/or frequent-flyer airline or third-party providers offer status. Also look into the small-business programs some carriers offer. Some travel manage- reports on on-time performance, de- ment companies also provide their negotiated discounts to their customers, particularly layed flights and mishandled baggage. with international carriers. Determine whether human resources, frequent-flyer loyalties The U.S. Department of Transportation and other costs of implementing preferred airline agreements are worth the benefits. provides such data for domestic airlines A. Estimate your domestic and international air volume for the next year based on last through the Bureau of Transportation year’s numbers and the company’s business plan, such as mergers and acquisitions, new Statistics at bts.gov. Also investigate product lines and new locations. Consider air volume for meetings and internal trips each airline’s maintenance issues and like training. Remember that volume ultimately is determined by business dynamics the average age of its aircraft. and the economy, not the travel manager. 1. Obtain marketshare information by B. Ask frequent travelers which airlines they use and why, assess frequent-flyer member- city pair from the DOT, recogniz- ships, understand which air and ground amenities matter to travelers and determine ing that such data is free but dated willingness to support a preferred airline program. by at least a few months. Data from C. Determine the ‘value drivers’ of your organization and search for the most suitable other sources, including ARC, travel program accordingly. Make sure that the deal will satisfy your organization’s safety and agencies, consultants and other third security requirements as well. parties, can be costly. BUSINESS TRAVEL BUYER’S HANDBOOK 2017 AIRLINES www.businesstravelnews.com 2. Look closely at data for more than many airlines also contract services at headquarters. Such relationships one year to ensure you are refer- funds to offset many of those fees. ensure that changes in regional staff do encing an established trend. Look 4. Analysis of your organization’s travel not eradicate contacts. Headquarters- at different quarters of the year to patterns may present opportuni- level relationships may be limited, determine the seasonal impact, ties for citypair-specific deals rather especially for smaller travel programs. acquisition or divesture activity and than systemwide deals, but do not Many airlines conduct quarterly or one-time impacts. sacrifice overall savings for sizable monthly progress reviews while others 3. Focus on the capacity each airline citypair-specific discounts. For more will meet only once or twice per year. has in given cities and on certain than one systemwide deal, carefully Generally, more interaction is better, as routes. The difference between one analyze which airlines will maximize strong airline reps have a current un- carrier’s 60 percent market share on citypair coverage without compro- derstanding of market developments a route and another carrier’s 20 per- mising your share obligation to pro- and can share best practices regarding cent share is significant to the buyer’s vide market share to other airlines. contract management and policy. opportunity to move share. 5. Determine whether the carrier 2. TMC contacts. 4. Useful information can be obtained participates in an airline alliance. a. The TMC might have an es- from several third-party firms and Some airline partners offer joint al- tablished relationship with the from consultants performing data liance deals, while others even have airline. If so, ensure your organi- analyses with optimization model- developed antitrust-immune joint zation’s goals are compatible with ing. This will take into account both ventures, through which partners this relationship. client traffic and airline capacity and manage capacity, fares and corporate b. TMCs frequently are the primary determine the optimal airline or deals as one entity. Determine the source for your organization’s airlines to serve your travelers. magnitude of alliance relationships spending history and can be part- C. Document your plan to shift market and how it impacts the carrier’s ne- ners in negotiations. share and influence travelers’ airline gotiating leverage. Consider whether 3. Peers and consultants can provide choices. Note past successes. the airline requires an agreement benchmarking data. Get involved D. Determine how and to what degree you through the joint venture as opposed with local boards, industry groups can leverage your employees’ meetings to either an alliance or individual for buyers and sellers and network- and incentive travel. carrier agreement. ing groups to share best practices E. Airlines increasingly charge for à la 6. Note your negotiating leverage. and industry trends. carte offerings above the base fare. a. Purchasing premium-class fares C. Some organizations, especially larger Ancillaries include seat selection, on long-haul routes on which ones, take a formal approach by dis- checked bags, early boarding, Wi-Fi, multiple carriers compete for tributing requests for proposals to onboard meals and upgrades. Though passengers works in your favor. headquarters and local sales offices. many of these fees are not negotiable, Airlines know they don’t have to Include essential information only. travel buyers should attempt to capture work hard to sell economy fares Agencies and consultants can help spending through expense report- on a short-haul route on which formulate and streamline the process. ing and corporate card data to show one carrier has a monopoly. airlines the total amount spent. b. A demonstrated ability to shift IV. NEGOTIATE THE DEAL F. Compile benchmarks. Data from peers travelers to an airline makes your A. Outline the benefits of your busi- and TMCs lend perspective. company a desirable customer. ness to the airline. Typically, airline Failure to deliver on marketshare agreements are written by and for the III. GET STARTED commitments you made to car- airlines, though your legal department A. Not all business is equally attractive to riers or inability to demonstrate may seek modifications. airlines. Understand your travel pat- that your policy can shift travelers 1. Even before you issue an RFP, provide terns and find a compatible supplier. causes airlines to question your data on your organization’s traffic 1. Recognize airline network strengths: ability to deliver on commitments. patterns and spend to prospective air Short-haul versus long-haul, hub and Noncontracted airlines will take partners. Highlight areas of interest to spoke versus point to point, interna- note when they are receiving far the airline, including such high-yield tional reach versus domestic focus. below their fair share of a market, purchases as international business 2. Recognize product differences. Some as it indicates your ability to sup- class. Many airlines will require your airlines are no-frills, low-cost opera- port preferred carriers.