Corporate travel managers face an increased burden with continued consolidation among air carriers globally, which creates contractual complexity to fulfill the corporate contract with travel suppliers.
The impending completion of the American Airlines/US Airways merger is only adding to the maze, as the consolidated airlines have reduced reliance on discounting by unbundling fares and boosting load factors to 85%. This not only means that the airlines are much less likely to discount seats even for high-yield corporate customers, but also that corporate travel managers are faced with increased requirements to fulfill contractual obligations across carriers.
Corporate travel manager Egencia has released a report that highlights this exact issue:
Not surprisingly, the remaining carriers are now more selective in committing to contractual discounts. With fewer options for each city pair, airlines have come to expect a particular share, so while they once offered corporate contracts to virtually everyone on every route, they now provide discounts only when it will increase market share above the natural level.
They also track performance much more closely, cancelling contracts as early as 90 days after launch if they find companies buying fewer seats than anticipated and agreed upon
Managing complexity
Managing complexity could be the newly updated title for a corporate travel manager - not only dealing with "open travel" considerations but also an unforgiving landscape as far as hitting cost targets for corporate travel programs.
The report specifically recommending the following steps for managers facing this increased complexity:
Focus on a mix of carriers that will allow you to maximize your discounts and still fulfill your contractual commitments.Manage overlaps to ensure that “preferences” in one market don’t push travelers “out of policy” in another.Optimize sorting and messaging within your travel management company’s online booking tool to ensure that it helps – and doesn’t hinder – contract performance, especially when multiple contracts might conflict.
These recommendations are derived from the realization that traditional single-market share contracts are much less likely to be achievable as the larger carriers double-down in specific hubs. Flights between two airline's competing hubs would therefore be difficult to manage, as it's near impossible to sustain share in those situations.
The idea here is to realistically assess an individual company's travel needs and attempt to match them more specifically to the newly-settled landscape - especially as consolidation has resulted in an end-game of the Big Three with less disruption likely moving forward.
This complexity is enhanced when negotiating international traffic, as joint ventures require share on specific airlines beyond the key player. By understanding these terms, the corporate travel manager is much better poised to avoid overlaps and reduce chances of not fulfilling a negotiated contract. It's especially confusing here given the proliferation of code-shares, which has contracts written requiring usage of the not-always-clear "marketing carrier."
Using the corporate booking technology
A very obvious reaction to this increased complexity is to consider how the technology that employees/managers use to book their travel facilitate successful fulfillment of contract.
Proper bookings can be encouraged by placing preferred routes up top in the booking path, while also clearly marking certain flights as in compliance. This allows contractual carriers to be showcased, while also ensuring that other options - say a cheaper flight - can also be served up on that first page. First page placement is essential, as 67% of those using Egencia's tool book on that first page.
Especially as companies shift to allowing direct bookings by employees, corporate travel managers are challenged to ensure contractual compliance by those that aren't necessarily interested in the specifics.
The continued gamifcation of corporate travel offers an opportunity to address this, by encouraging the right bookings and creating a visible, company-wide system to share successes within the travel program. This also offers a chance to use technology to align priorities company-wide, showing how savings in the travel program via full compliance can trickle down into the organization as a whole.
Or perhaps there's just no point in dealing with contract pricing
One graphic is particularly compelling, showing the difference of negotiated fares versus non-negotiated fares in the past three years.
This data comes from Egencia's clients, and begs the question: at this point, as airlines are developing much more sophisticated ways to determine corporate discounts and overall fare pricing, why bother committing time to both negotiations and maintenance when there's not a clear financial imperative to do so?
It's a valid question that should be considered by any corporate travel manager drowning in dubious discounts. By considering just how these contracts work for a specific program - say, if a company has a well-trodden path between two cities that would be especially lucrative on contract - travel managers can ensure that the right resources are allocated to the most beneficial path.
In a message to Tnooz, Egencia’s Chris Vukelich sees this as a valid discussion to be had within each individual corporate use caseL
A company needs to ask itself do we have the ability or do we want to drive the behavior of our traveler? If we do, in the new consolidated airline world, we can deliver on the promise and reward the airline with our contracted share commitment. If we don’t, we may be better off buying cheapest on day.
The full report can be viewed here.
RELATED: Corporate travel manager priorities infographic.
NB: Crowded sky image courtesy Shutterstock.