Airlines as part of corporate negotiations are tightening up
on granting loyalty program elite status, a benefit that gained new value in
recent years as such status exempted many frequent flyers from some of the
carriers' new add-on charges.
Rearden Commerce senior vice president for travel services
Tony D'Astolfo last week suggested the new stinginess while moderating a panel
discussion at the Business Travel Media Group's Travel Management 2011
conference in New York. He noted that in the past, airlines would "give
away" premium status to some number of a corporation's top travelers as a
perk of a preferred relationship. Travel buyers with Citi and Lockheed Martin
corroborated that this now is apparently harder to come by.
"When we made nominations for frequent flyer status,
they were significantly limited" in recent negotiations, said Lockheed
Martin Corp. Global Supply Chain Operations travel and meeting services
director Richard Wooten. "Of course, that correlates with the money
airlines are realizing off the fees."
"All the airlines started with the answer of no,
none," said Citi global travel department managing director Mick Lee.
"We sort of [laughed], and then at the end, before contract award, we got
everything we wanted."
Concur executive vice president for supplier management and
advertising Mike Koetting, also a speaker at the conference, said airlines
likely "realize there's greater financial impact" of restricting the
benefit, but he also suggested consolidation plays a role. "Someday there
will be two airlines, and half the traveling public will be a frequent flyer on
one of them," he said. "That could be one reason there's been some
push-back as the airlines consolidate to try to maintain" the value of
Loyalty programs for many years were enemies of managed
travel programs, since they could lead travelers to seek benefits on carriers
that were not preferred by their companies. But travel managers lately have
been taking advantage of negotiated status matching to support preferreds.
Citi's Lee paid particular attention to this element of her
latest airline talks. "When we were closing our request for proposals
globally, before we would provide any contract award, we included the
requirement of elite status memberships" for a certain portion of the
company's 60,000 frequent travelers, she said. The goal was to mitigate the
costs of checked-bag fees and other ancillary charges.
"Close to the time we were awarding the contract, we
made it clear: 'Until you say yes to this, we will not award you with the
business,' " said Lee. "We purposely did that towards the end when
everything else had been agreed upon."
Lee's team then informed travelers of this benefit to using
preferred suppliers at the same time they communicated revised policies that
took effect Oct. 1, including a ban on first-class tickets, restrictions on
business class, tightened eligibility for reimbursable purchases and a new rule
that fares for flights on non-preferred carriers would only be reimbursed at 80
The grants of status "helped us balance out the
reception from the travelers to let them know we were keeping not only safety
and security and productivity in mind, but also traveler comfort," Lee
Finding that ancillary purchases, mostly for bag fees,
represented about 1.6 percent of Lockheed's annual U.S. domestic air spend, or
about $4.5 million, "was an eye-opener," Wooten told attendees.
"I look at it as eating into our discount agreements with airlines."
Citi determined that ancillary purchases ranged between 2 percent and 4 percent
of its $500 million annual air tally.
As a result of its internal review, Lockheed implemented
policies calling for reimbursement of inflight Wi-Fi, onboard meals and checked
carry-on—within certain parameters—while entertainment, blankets and alcohol
are on the employee's dime. Travelers also are allowed to pay for improved seat
comfort but cannot be reimbursed.
Four in 10 travel managers told PhoCusWright in an August
survey that their companies had adopted or were adopting policies to guide
travelers on what is reimbursable among the airlines' ancillary, fee-based
offerings. Three-quarters of the 76 respondents also said it was important to
track spending on ancillary services; 56 percent said they had implemented a
A majority of travel managers surveyed agreed that the value
of tracking such spending includes monitoring policy compliance, detecting
waste and fraud, and helping with budgeting and supplier negotiations. One in
five respondents said their companies reimburse travelers for all ancillary
services, while 71 percent said they do so for some.