Sticking with a corporate group product may be paying off for some legacy carriers, according to the ninth annual BTN airline survey, as the top-ranked network carrier recommitted to the market segment. However, price continued to be the prime consideration for buyers, and flat discounts still are the most popular product for corporate group customers.
Respondents scored American Airlines, which came in second to Southwest Airlines in the overall survey
(BTN, Nov. 6), the most flexible on group negotiations. Unlike Delta Air Lines, which discontinued its meetings and group desk in early 2005, AA has picked up new customers by retaining its corporate meetings product, said vice president of global accounts Frank Morogiello.
"We have a full offering for meetings. We never abandoned that product; a lot of other guys have—whether they lost manpower or man-hours or the ability to sell group and meeting travel. We still go after that in a very hard way," Morogiello said. "When pricing changed and simplified fares dropped the rates down off of regular coach fares, some airlines thought you didn't need meeting fares any more. We totally disagreed with that. We took full advantage of that. That's one of the reasons we did really well."
The survey, conducted by Equation Research, compiled views of the 15 largest domestic airlines as identified by the U.S. Department of Transportation, excluding the regional affiliates of major carriers. The survey had 399 travel management professional respondents from BTN's qualified readership and research council.
Respondents were asked to grade only those airlines with which they had done business in the past year on a scale of one (poor) to five (excellent) in nine categories, including the carrier's flexibility in negotiating pricing for corporate groups.
For flexibility in negotiating meeting pricing, American Airlines fell slightly from its score of 3.01 in 2005 to 3.00 but retained its top finish among major carriers. More than 60 percent of respondents used AA in the past year. Continental Airlines retained its number-two spot with the same 2.97 rating as last year.
"We picked up customers as a result [of retaining the meetings product], and we also learned we could be even more selective as we were doing it. They couldn't get a meeting fare or a zone fare from someone they used to be able to call. We could pick and choose and reward the guys that stayed with us the whole time and keep them in the meeting business," AA's Morogiello said.
Continental Airlines also decided two years ago to retain its meetings product, a move that has paid off with customers, according to vice president of North American sales Monisa Cline. However, the product was reconfigured to better suit the changing habits of buyers.
"We still offer them the MeetingWorks product. Just like we did on the transient side, we simplified the pricing there, in terms of discount levels being in line with the fare levels. That's been something different in regard to the other carriers, and we've gotten a lot of good feedback on it because it's a lot simpler for people to understand: discounts based on price, versus trying to figure out what bucket, what class of service, when do I get this discount. People understand price," Cline said.
In addition, Cline said she has seen more corporate customers trying to leverage combined transient and group volume with the carrier.
Northwest Airlines, ranked sixth in group negotiations among frequently used carriers, also retained its groups and meetings desk after Delta eliminated its group product. NWA director of specialty sales Jeff Lobl said groups focused on price tend to opt for flat discounts of up to 7 percent off published fares and higher-end groups ask for zone fares for increased flexibility.
"Like many things in the airline industry, we have found there is a migration from zone fares to the percent discount," Lobl said, adding that the trend has been most apparent during the past six years.
However, NWA has no plans to discontinue zone fares or its groups and meetings desk, he said. "The environment is changing, but we're as committed to this business going forward as we have been in the past. We reevaluate it every year and we continue to think it makes sense for us," Lobl said.
Price can be a powerful incentive to groups to become more flexible in their travel plans, he said, and is the preferred tactic in driving group business to off-peak dates and alternative routes.
NWA has a product aimed at companies that wish to combine their transient and group expenditures for leveraging, but Lobl said it primarily is aimed at data consolidation instead of rate negotiations. Earned tickets and upgrades also are not a typical negotiation point, he said, though the carrier offers them.
"We have a product and it's really one-size-fits-all. There isn't much variation from account to account," he said.
Continental and AA retained their group products and recommitted to meetings, but Southwest Airlines—which eliminated its groups and meetings fares three years ago,
(Meetings Today, Dec. 8, 2003)—still ranked third in the survey for group negotiations. Price continues to drive most buyers purchasing habits, executives said.
"We don't have a specific meetings program, per se. We did have a meetings program, but we ended it, not because we didn't think there was demand for it, but because our existing low-fare structure wasn't conducive to it. Why make a travel manager contact us and sign a contract, when they can just have access to those low fares?" said Kevin Krone, Southwest vice president of marketing, sales and distribution.
Low fares and flat discounts helped low-cost carriers dominate the 2005 survey in their flexibility with groups
(Meetings Today, Dec. 5, 2005). Many had pushed aggressive, flat group discounts of up to 15 percent. This year, all LCCs in the survey weakened compared with legacy carriers, and usage rates all were under 25 percent of respondents.
Costs are a dominant issue for both buyers and for carriers, said Mitch Cwanger, American Express Advisory Services practice leader for air.
Though the survey leaders have retained meetings products, he said, all carriers are looking to trim unnecessary costs.
"Airlines, in an effort to cut costs, have been reducing the staff in their meetings and groups departments—or even eliminating them completely. They have been urging their clients to take advantage of transient discounts," Cwanger said.
Those transient discounts tend to be better for buyers, as carriers have been hesitant to block off and discount a significant part of their inventory for a group when they might gain more revenue from transient fares.
"If you can utilize your corporate discounts and pricing to reduce the cost of your meeting travel, that makes a lot of sense. Some carriers have moved away from doing separate meeting pricing," said Bob Brindley, vice president of the Americas for Advito, the travel consulting division of BCD Travel.
Delta Air Lines' fifth-place finish, with a score of 2.72, is likely a result of the carrier's decision to eliminate its groups and meetings desk, Brindley said.
Jay Boehmer contributed to this report.