BUSINESS TRAVEL BUYER’S HANDBOOK 2016 AIRLINES Working with Airlines A. Obtain information about your travel program from your TMC databases, online booking systems and third- party data consolidators: 1. Top 20 city pairs by segment and passenger count, including carrier 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 rst class. Know the trade o s in using booked, ticketed or own data. While bookings data is available more readily and with less of a lag, it does not have the same precision as ticketed or own data. WITH THE FINAL MAJOR STEP IN THE AMERICAN AIRLINES-US AIRWAYS 4. Analyze corporate card data to nd consolidation completed last year, U.S. travel buyers fi nd themselves with only three trips booked outside your TMC. legacy carriers left, and airlines globally continue to tighten up with alliances. Consolidation Airlines do not count those trips has continued this year, as Alaska Airlines agreed to acquire Virgin America. Even so, toward the volume you agreed in plenty of negotiating opportunities remain for corporate air programs, which usually your contract to provide, but the represent the biggest portion of overall travel spending. Airlines continue to want volume does add to your negotiat- high-yielding, corporate business and are battling to improve reliability and onboard ing power, particularly if you’re able experience in order to win it. Volume, of course, remains king in airline negotiations, but to articulate actions you’re taking to a smaller program that can demonstrate compliance and business on key routes will minimize leakage. have an advantage against larger programs with little grasp of data and traveler behavior. B. Investigate government and indepen- dent information on airlines. Perhaps I. BEFORE YOU COMMIT an airline has low load factors on a Most corporate discount deals are measured on market share, but buyers can gain leverage if route your travelers y frequently, or they have high-yield spend like rst or business class or full-fare coach available to shi to new perhaps another carrier has launched suppliers. Airlines also desire discounted economy or lowest-logical-fare business, providing service on the route, allowing you it’s business the carrier would not receive without o ering discounts. Considering that suppli- to negotiate aggressively. Be aware ers are consolidating, commit only to share you can manage. Many companies overcommit, of airline customer service metrics. and then underperformance puts programs at risk. Discount programs are structured based Some airline or third-party provid- on opportunities. Consider a few hundred thousand dollars as a minimum for the U.S. point ers o er reports on on-time perfor- of sale, though your agency can provide more exact benchmarks. If your volume does not mance, delayed ights and mishan- meet the minimum, look into revenue- or sector-based incentive programs for back-end dled baggage. ! e U.S. Department rebates, club passes, waivers and favors, upgrades and/or frequent- yer status. Some travel of Transportation provides such data management companies also provide their negotiated discounts to their customers, particu- for domestic airlines through the larly with international carriers. Determine whether human resources, frequent- yer loyalties Bureau of Transportation Statistics at and other costs of implementing preferred airline agreements are worth the bene ts. bts.gov. Also investigate each airline’s A. Estimate your domestic and international air volume for the next year based on last maintenance issues and the average year’s numbers and the company’s business plan, such as mergers and acquisitions, age of its aircra . new product lines and new locations. Consider air volume for meetings and inter- 1. Obtain marketshare information by nal trips like training. Remember that volume ultimately is determined by business city pair from the DOT, recognizing dynamics and the economy, not the travel manager. that such data is free but dated by at B. Ask frequent travelers which airlines they use and why, assess frequent- yer member- least a few months. Data from other ships, understand which air and ground amenities matter to travelers and determine sources, including ARC, travel willingness to support a preferred airline program. agencies, consultants and other third parties, can be costly. II. GATHER INFORMATION 2. Look closely at data for more than Proper data can help you win discounts for city pairs, multiple destinations from one one year to ensure you are refer- city, regionally or across your travel program. encing an established trend. Look 56 Business Travel News www.businesstravelnews.com BUSINESS TRAVEL BUYER’S HANDBOOK 2016 AIRLINES at di erent quarters of the year to many of those fees. relationships ensure that changes determine the seasonal impact, 4. Analysis of your organization’s travel in regional sta do not eradicate acquisition or divesture activity patterns may present opportuni- contacts. Headquarters-level rela- and one-time impacts. ties for citypair-speci" c deals rather tionships may be limited, espe- 3. Focus on the capacity each airline than systemwide deals, but do not cially for smaller travel programs. has in given cities and on certain sacri" ce overall savings for sizable Many airlines conduct quarterly routes. ! e di erence between one citypair-speci" c discounts. For more or monthly progress reviews while carrier’s 60 percent market share on than one systemwide deal, carefully others will meet only once or twice a route and another carrier’s 20 per- analyze which airlines will maximize per year. Generally, more interac- cent share is signi" cant to the buyer’s citypair coverage without compro- tion is better, as strong airline opportunity to move share. mising your share obligation to pro- reps have a current understand- 4. Useful information can be obtained vide market share to other airlines. ing of market developments and from several third-party " rms and 5. Determine whether the carrier can share best practices regarding from consultants performing data participates in an airline alliance. contract management and policy. analyses with optimization model- Some airline partners o er joint 2. TMC contacts. ing. ! is will take into account both alliance deals, while others even have a. ! e TMC might have an estab- client tra# c and airline capacity developed antitrust-immune joint lished relationship with the airline. and determine the optimal airline ventures, through which partners b. TMCs frequently are the pri- or airlines to serve your travelers. manage capacity, fares and corporate mary source for your organiza- C. Document your plan to shi$ market deals as one entity. Determine the tion’s spending history and can share and in% uence travelers’ airline magnitude of alliance relationships be partners in negotiations. choices. Note past successes. and how it impacts the carrier’s 3. Peers and consultants can provide D. Determine how and to what degree negotiating leverage. Consider benchmarking data. Get involved you can leverage your employees’ whether the airline requires an with local boards, industry groups meetings and incentive travel. agreement through the joint venture for buyers and sellers and network- E. Airlines increasingly charge for à la as opposed to either an alliance or ing groups to share best practices carte o erings above the base fare. individual carrier agreement. and industry trends. Ancillaries include seat selection, 6. Note your negotiating leverage. C. Some organizations, especially larger checked bags, early boarding, Wi-Fi, a. Purchasing premium class fares ones, take a formal approach by onboard meals and upgrades. ! ough on long-haul routes on which distributing requests for proposals to many of these fees are not nego- multiple carriers compete for headquarters and local sales o# ces. tiable, travel buyers should attempt passengers works in your favor. Include essential information only. to capture spending through expense Airlines know they don’t have to Agencies and consultants can help reporting and corporate card data to work hard to sell economy fares formulate and streamline the process. show airlines the total amount spent. on a short-haul route on which F. Compile benchmarks. Data from one carrier has a monopoly. IV. NEGOTIATE THE DEAL peers and TMCs lend perspective. b. A demonstrated ability to shi$ A. Outline the bene" ts of your busi- travelers to an airline makes your ness to the airline. Typically, airline III. GET STARTED company a desirable customer. agreements are written by and for the A. Not all types of business are equally Failure to deliver on marketshare airlines, though your legal depart- attractive to airlines. Understand commitments you made to car- ment may seek modi" cations. your travel patterns and " nd a com- riers or inability to demonstrate 1. Even before you issue an RFP, patible supplier. that your policy can shi$ travelers provide data on your organiza- 1. Recognize airline network strengths: causes airlines to question your tion’s tra# c patterns and spend to Short haul versus long haul, hub and ability to deliver on commitments. prospective air partners. Highlight spoke versus point to point, interna- Noncontracted airlines will take areas of interest to the airline, in- tional reach versus domestic focus. note when they are receiving far cluding such high-yield purchases 2. Recognize product di erences. below their fair share of a market, as international business class. Some airlines are no-frills, low- as it indicates your ability to sup- Many airlines will require your cost operators, and others provide port preferred carriers. data to be processed through a comprehensive services. B. Communication is key to any busi- third-party data aggregator before 3. Recognize the total cost. Some ness relationship. they submit a proposal.