BTN's 2012 Airline Survey: An Unprecedented Sweep - Business Travel News

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BTN's 2012 Airline Survey: An Unprecedented Sweep

November 27, 2012 - 10:15 AM ET

By Jay Boehmer

Delta Makes It Two Years In A Row Atop BTN Airline Survey By Winning Every Category

Delta Air Lines for the second straight year topped its major domestic competitors in Business Travel News' Annual Airline Survey, earning the distinction of being the first carrier in the survey's 15-year history to garner the highest score in each category rated by corporate travel buyers.

Fraught with a messy merger integration, last year's second-place finisher, United Airlines, fell to the bottom spot in this year's survey, while American Airlines—despite an ongoing Chapter 11 restructuring and some recent, high-profile operational issues—clawed its way to a second-place finish.

[Please click here to view the digital edition of BTN's 2012 Airline Survey, featuring all charted data and airline rankings in individual categories, downloadable as a pdf.] 

Southwest Airlines, meanwhile, improved to third place from a last-place spot in 2011, just one-hundredth of a point ahead of this year's fourth-place finisher, US Airways.

Apart from United, each carrier maintained or improved its overall score from BTN's 2011 survey. Still, nearly 31 percent of the 377 corporate travel buyers surveyed this year indicated domestic airline service worsened during the past 12 months, while nearly 40 percent saw no change in overall service. Thirty percent said they spotted improvements.

Apart from Delta and American, carriers this year drew lower scores than last year from buyers rating them on flexibility in structuring corporate transient discount programs. Asked what their preferred carrier could do to improve relationships, many buyers pointed to something they're not likely to get at a time of relative strength in airline pricing power and constrained supply: better discounts.

Delta Dominates Domestic Challengers 

Delta "must be reaping it in," said Autodesk director of global travel Bruce Finch. Indeed, Delta executives this year have cited share shift as a key reason for persistently better-than-average corporate revenue gains. Even as some recent indicators pointed to slower growth for corporate travel demand—or declining volumes, in some cases—Delta during its third-quarter earnings conference call reported corporate revenue growth of 8 percent. "We continue to gain traction in corporate revenues," declared president Ed Bastian.

Throughout the year, it was clear to airline investors and those studying industry booking data that Delta was winning business. BTN's survey shows the carrier also has been winning respect.

"They actually want the business," said Finch. "They are hungry in the sense that they are willing to do the things that are necessary to get a company's business. They're not hiding behind the corporate stance of, 'This is all we're willing to give.' They're willing to step up and do what's necessary. Our rep is phenomenal."

Buyers speaking with BTN struggled to find any harsh words for Delta. While two survey respondents bemoaned service reductions in Memphis and Cincinnati—two markets Delta deemphasized following its merger with Northwest Airlines—the majority praised it for upgraded corporate client reports, flexibility in structuring deals, onboard and on-the-ground service and operational prowess. The latter has been evident in strong U.S. Department of Transportation performance metrics for on-time arrivals, completion factor and baggage handling.

As United continues to get its house in order following a merger with Continental, and as American navigates a flight path out of bankruptcy, Delta has been a stable force in the league of major corporate airlines.

Delta appears "really focused on improving the customer experience," according to a client email sent by Steve Glenn, chairman and CEO of Lincoln, Neb.-based Executive Travel. "With all the challenges faced by United and American this year, Delta appears to be the leader of the pack for positive service improvements."

Delta senior vice president of global sales Steve Sear attributed Delta's sweeping finish in BTN's airline survey to the "hard work of the 80,000 Delta employees worldwide," but travel buyers also singled out Sear, vice president of global sales Bob Somers, president Ed Bastian, CEO Richard Anderson and their individual account reps.

"Richard Anderson has set the benchmark for consolidation," said First Data Corp. global strategic sourcing director Pamela McTeer. "He's done it right for Delta and Northwest. Certainly, I think the other carriers are playing a lot of catch-up on that. He does it right and listens to his customers. He's one of the few CEOs of airlines that really gets out, though [Southwest CEO] Gary Kelly really does that as well."

In a June memo to corporate customers, Sear highlighted Delta's efforts to gain and retain corporate business, citing the carrier's investments in sales and sales support teams, expanded client reporting that includes "new information about corporate ancillary spend, the traveler experience and sales support value-added touchpoints," and numerous upgrades to onboard and airport products. Delta in the past year also opted to expand sales of its premium-economy product to global distribution system channels and maintained its position as the airline with the most Wi-Fi-enabled aircraft in the domestic skies.

Years removed from bankruptcy and a subsequent merger with Northwest, Delta's "entire focus is on the customer, because everything else is behind us," said Somers. "From a sales perspective, we're feedback junkies—we have advisory boards, surveys, regional town hall meetings. We're not only telling them the Delta story, but also finding out what we can do." He added that investments in fleet, facilities and Wi-Fi are improvements that have been requested by "bread-and-butter corporate and agency partners."

Delta had a head start against its major domestic competitors in reorganizing and then merging with another carrier, but those competitors hardly are standing still in pursuing corporate accounts. "Given that it's a competitive industry, we're going to stay humble and continue to earn their business every day," Sear this month told BTN.

American Ascends  

For a carrier that has been beleaguered by labor issues, daunted by below-average operational performance, humiliated by seats coming unhinged mid-air and challenged by bankruptcy, American surprised several travel buyers with a second-place ranking in BTN's survey. For example, Autodesk's Finch called American "a company in bankruptcy that is not delivering."

Despite such sentiments, American rebounded from a lackluster finish in 2011 to more familiar environs among the top two airlines rated by BTN. Its scores were aided by perceived strength in negotiating services, resolving client issues and employing what buyers rated as a strong sales force relative to peers.

After all, airlines in this survey are not rated specifically on the stability of finances, timeliness of arrivals or even the adhesiveness of seats, but more so on how they build relationships with and deliver services to corporate clients. These are areas in which AA consistently has excelled during 15 years of BTN surveys.

"They're really good at relationships," said Steven Mandelbaum, vice president of information systems and travel buyer for the Advisory Board Co. "They've done it for years and have very, very deep relationships with agencies and corporations. People always say, 'Who can we work with?' Well, you can work with American. In the past couple years it's been tougher for them, but others have been way worse."

One buyer respondent praised "competitive pricing" and "a good relationship" with the carrier, while another noted that "with all of the changes at American, they have done an excellent job of communicating changes and upcoming issues." Yet another respondent wrote, "American's rep stays in touch with me regarding our travelers on a biweekly schedule. He has promoted some of our road warriors' high status when they are near a threshold. Our rep personally handles complaints and sees them through to resolution."

In the run-up to its November 2011 filing for Chapter 11 protection, American had been losing corporate market share, according to data obtained by BTN. By May 2012, according to a memo to AA managers, "Since our filing, we have renewed or won more corporate account agreements compared to the same period last year." AA vice president of global sales Derek DeCross claimed that AA's monthly unit revenue metrics have outperformed those of the carrier's peers and provide evidence of winning business. "AA delivered the best unit revenue growth in the industry every month during the second and third quarters," he said.

DeCross said AA's reorganization process has enabled it to not only invest in products and services, but also re-evaluate how it approaches corporate clients.

Since filing, DeCross said the carrier has restructured "the entire global sales organization." While that meant the departure of at least one familiar face—former global division passenger sales managing director Frank Morogiello, who left on July 1—it also meant placing account managers closer to clients. For example, DeCross said AA moved a sales director and five strategic account managers to New York from Dallas for that reason. DeCross also said AA has developed divisions specializing in such key market segments as banking and entertainment.

He added that AA in the coming months will improve the level of detail in reports sent to corporate clients. While DeCross declined to detail the new metrics, he said he expects AA to "provide greater detail on each corporation's traveler experience."

As it restructures, AA also is making capital investments in its product. DeCross pointed to "plans to take delivery of more new airplanes than any other U.S. carrier by the end of this decade." Those will feature upgraded premium cabins and other amenities, including premium-economy seating and Wi-Fi. Regarding the latter, DeCross said he expects AA by year-end to provide Wi-Fi on 91 percent of its domestic U.S. flights. While AA's full book of aircraft orders continues for years to come, the airline already "is taking deliveries of new 737s every day," DeCross said.

"Going though this restructuring, we made a lot of changes to our sales force that we think position American's sales team to differentiate ourselves," DeCross said, "and not only demonstrate the pride we have for our airline, but the passion we have for our customers."

Value Still A Strong Suit For Southwest  

Southwest this year rose to third place from last year's fifth-place finish. The carrier in September 2011 assumed corporate sales functions from AirTran, which it previously had acquired, and the combined sales team now is responsible for selling both brands. While AirTran is expected to maintain its own identity into 2014, both sales and distribution at AirTran ultimately are expected to follow the Southwest model.

"The goal there is really to continue what we've done on the Southwest side: Meet with preferred customers and position both brands as preferred carriers in their program," said Southwest director of corporate sales and distribution marketing Rob Brown. That combined sales force is "hitting the streets very aggressively," Brown added.

When calling on corporate customers, "we discuss both brands, we look at where there are opportunities to grow with those corporate customers on either brand and we put together one agreement that represents both brands," he explained.

To that end, Southwest this past summer began testing with 10 corporate accounts a new customer service help desk, Brown said, with plans to expand it to other clients. The limited initiative already has drawn "a lot of positive feedback," he said.

While Southwest has focused on Fortune 1000 firms and other large private companies, the carrier during the past year dedicated a new salesperson to growing its small and midsize customer base. One focal point will be the Swabiz business-booking portal, for which Brown expects to launch within a year new functionality and enhancements, including plans to "enrich" the reporting features.

Though Southwest is well-known for its preference to directly control much of its product distribution, Brown said the carrier has been "diligent about expanding the distribution portfolio over the past several years to make certain that our sales team has tools necessary." A three-point distribution strategy has focused on direct access for certain corporate booking tools, the Swabiz portal and the limited GDS participation, but when it comes to distribution, Southwest continues to underperform all peers in the BTN survey.

Though buyers rated Delta highest in every category, Southwest finished in a first-place tie for overall price value, a traditionally strong suit for the carrier. Though Southwest long has cast itself as a low-fare alternative to network carriers, by mid-October it had served as the moving force behind five of the seven successful 2012 domestic U.S. airfare hikes, according to FareCompare.

Still, at least one buyer noted that Southwest makes low fares more readily available than network carriers. "Though they match the Southwest fares, the number of offerings [from network carriers] are far fewer since they've reduced the low-bucket fares to three seats on a flight," said First Data's McTeer.

US Airways Sharpens Corporate Focus 

After jumping last year to third place from a last-place finish in 2010, US Airways finished fourth in this year's survey. Its overall rating from 2011 remained flat at 3.07.

After de-emphasizing the corporate market following its 2005 merger with America West Airlines, US Airways since has refocused efforts to generate new corporate business.

Between April 2010 and April 2011, US Airways increased its domestic sales force by 50 percent to 42 full-time sales positions. While that number since has stabilized, the carrier continues adding to its portfolio of corporate clients, according to US Airways managing director of passenger sales Michael Schmeltzer.

"We'll still be pretty aggressive in terms of talking to new clients," he said. "Of course, the history was that we weren't as available as we are today. We really want to be known as the most responsive sales force and flexible to work with."

US Airways landed second behind Delta for flexibility in negotiating transient pricing with corporate clients. It is one of the few large domestic carriers that does not use systems furnished by The Prism Group to analyze client performance and structure contracts. Schmeltzer said US Airways also has shunned "a cookie-cutter approach" to structuring deals.

Following a path blazed last year by Delta, US Airways in July began detailing client-specific data on bag fees by showing in monthly reports the number of bags checked by corporate travelers, the sum of fees paid and the number and value of fees waived for frequent flyers. Schmeltzer said the new reports have been "very well-received" by clients. The carrier next year plans to expand those reports to include client spending on such ancillary purchases as its preferential Choice Seats economy-class seating and details on upgrades granted to corporate travelers through their frequent-flyer status.

Schmeltzer said US Airways also is exploring reports on how clients' travelers are impacted by service disruptions, "whether that be cancellations or significant delays. It's one thing to see our DOT reporting—that's great. But traveler managers like to see how their travelers specifically were impacted."

Meanwhile, travel buyers this year rated US Airways second in the "distribution channels" category. The airline recently began selling Choice Seats via Sabre channels.

United: Blighted, But Reignited  

The bottom of BTN's Annual Airline Survey is terra incognita for United senior vice president of sales Dave Hilfman, who for years led Continental's sales force to a consistent position among the two highest-rated carriers. Even last year, following the United-Continental merger, the combined United placed second behind Delta. 
During the subsequent year, United was beset by numerous challenges—from a buggy consolidation of a passenger services systems to a series of operational struggles during the summer. The bad news hit travel buyer consciousness at about the same time BTN fielded this survey.

Even before the carrier's fateful shift to a single passenger services system, United hastened to "merge 2,500 agreements together at one time to hit that March 2 date, prior to the cutover, to have fares filed," said managing director of worldwide sales resources Chuck Crowder. "We didn't want to any of our customers to go dark and not have an agreement."

But in the aftermath of the March cutover, United customers faced unsynced passenger name records, missing itineraries, check-in issues, mileage accrual problems, upgrade difficulties and long hold times to speak with customer service agents. Additionally, United suspended sales of Economy Plus seating through global distribution channels and halted its prepaid PassPlus program.

United CEO Jeff Smisek in July acknowledged the carrier "added new stress to the system by simultaneously converting to a single passenger system, implementing hundreds of new processes and procedures, rerouting aircraft across our network and harmonizing our maintenance programs. Those changes were in large part responsible for the degradation of our operational performance," which included what he called declining performance "on metrics such as on-time arrival, mishandled bag rates and cancellations."

As United worked through such issues, sentiments from the corporate travel community were harsh. "Their two-year merger process with Continental Airlines has caused even their best customers to start using other airlines as one bad situation after another seems to cause a domino [effect] of delayed and canceled flights, lost luggage, seat assignment mess-ups, computer system failures, frequent flyer system failures and the list goes on and on," wrote Executive Travel's Glenn.

The challenges certainly have not gone unnoticed at the top. Smisek described United's recent third quarter as "one of the toughest quarters of our integration." Carrier executives acknowledged some corporate share shift, likening operational and technology issues to a roadblock that prompted a detour by some clients.

The Buckingham Research Group airline analyst Dan McKenzie estimated that "the loss of corporate travel revenue given integration difficulty that resulted in poor operations" during 2012 could represent up to $750 million.

Resolved to mend corporate relationships and regain business, Hilfman told BTN that United has taken to heart the grief of corporate travel buyers. "We pride ourselves on being easy to do business with, and we weren't easy to do business with following all of these changes," he said. "That involves staying close to our customers, and, even in the tough times, we have to be highly visible with our clients."

Now, United executives claim that system integration issues are in the rearview mirror and operational performance has improved. The carrier also is working to improve programs for corporate and agency clients.

Crowder said United not only has "added staff in the corporate programs division" to speed response times, but also is in the midst of "simplifying contract terms," including "the legal structure, terms of ticketing instructions, etc." The carrier also expects to "develop new products based on different industry types," he said.

"Typically everyone just got a standard corporate discount agreement," Crowder said. "There was some customization to it, but there were also pieces that were very standard across every industry and every corporation. Now, we're trying to better segment that and find where we're lacking a customized program."

As for products that fell to the wayside during system integrations, United officials expect the PassPlus program to be back online this year, while Economy Plus sales also could be reinstated in global distribution systems in that timeframe.

While Delta and US Airways added new details to their corporate reports, Continental was a pioneer in the space, though some reporting details also were suspended during integration.

"Something that Continental did in the past was our customer experience report, which gave different metrics based on the specific corporation and what their patterns are," said Crowder. "That's going to be rolled out shortly. During this integration, we had to make some changes to that reporting with the different IT platforms. Other carriers have brought that to the marketplace. We're getting back to our baseline, and we're enhancing what we have."

In short, Hilfman said United in 2013 should look much different to corporate clients than it did this year, a prospect for which several travel buyers expressed hope, even if some laced it with a shred  of skepticism.

"If United's plan comes to fruition, they'll be someone to contend with," said Autodesk's Finch. "Do I want my folks to wait two years for that to happen? Probably not. We need reliability now."

Airline Survey Methodology 

The 15th annual Business Travel News Airline Survey uniquely measures corporate travel buyer perceptions of airline performance in negotiating and maintaining preferred programs, delivering service and providing value.

Survey categories were developed through a series of exchanges with travel buyers, corporate travel agency managers and airline sales executives to reflect more clearly the way in which corporate air travel buyers perceive each airline.

Asked to grade only those airlines with which they "either negotiated a contract or booked a meaningful amount of business" in the past year, respondents ranked domestic U.S. carriers in 10 categories on a scale of one (poor) to five (excellent). BTN averaged scores in each category to create an overall score for each carrier. All categories were equally weighted.

Not every respondent rated every airline in every category. Those participants who offered no response for a particular category or airline were not included in that average rating.

BTN from June 28 to Sept. 24 collected responses from travel manager and buyer members of the BTN Research Council and a randomly selected subset of qualified subscribers to The BTN Group's Business Travel News and Travel Procurement publications. A total of 641 qualified respondents completed the online questionnaire, 377 of whom represented organizations that spent more than $500,000 annually on airline tickets.

In an effort to restrict the survey to perceptions of those involved in managed travel programs, respondents whose organizations spent less than $500,000 in annual U.S. booked air volume were excluded.

Of the 377 included in the final sample, 23 percent represented organizations with U.S. booked volumes between $500,000 and $1.9 million; 41 percent represented those spending between $2 million and $11.9 million and the remaining 36 percent represented those spending more than $12 million.

The survey listed the largest domestic airlines as identified by the U.S. Department of Transportation, excluding regional affiliates of major carriers. Alaska Airlines, Frontier Airlines, JetBlue Airways and Virgin America elicited responses from less than 40 percent of the survey sample and therefore were excluded from this report.

Equation Research hosted the survey and tabulated results.

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