BA Gets In The Global Game

<B>BA Gets In The Global Game</B>

By Amon Cohen

British Airways is offering global deals to multinational clients after a major restructure of its sales strategy. The airline claims to have tied up 40 to 50 global contracts over the past six months--including BP Amoco, Citigroup, IBM and PricewaterhouseCoopers--and is hunting for more.

Responsibility for the multinational deals rests with Niels Conradsen, the airline's general manager of corporate sales for the United Kingdom and Ireland. Conradsen joined BA last September from outside the aviation industry. However, the global offering dates back to last summer, when BA ordered sales staff in each national territory to cease reporting to their country general manager and start reporting to worldwide director of sales Dale Moss instead.

"All revenues now sit in Dale's remit, which means we can put global deals in place," said Conradsen. With BA country managers no longer having to worry about individual sales profitability, all of a multinational client's locations can enjoy the same negotiated benefits, regardless of their individual contribution to the airline's coffers.

Conradsen warned that this leveling out can cut both ways, with some territories worse off than before. "You cannot be sure every sector will be as good in the new deal as it was before," he said. "The client's Hong Kong office may say it can do better locally but the company will have to mandate globally, not cherry-pick. Clients will have to look at the trade-off."

Conradsen said that variations across markets will lead some corporations to conclude that a uniform global deal is not for them."There are companies that say they want a global deal because they think it sounds and looks good," he said. "When you dig deeper, it often ends up being three regional deals under a global deal."

Levels of discount are assessed not simply on volume but on a complex matrix of criteria, including the mixture of flight sectors and levels of premium traffic. There also are rewards for moving business to flights where BA has weaker load factors, which could mean corporates agreeing to fly to certain destinations on particular days of the week.

BA also is much more ready to grant net fares. "We are seeing a huge demand for net-net deals," said Conradsen. "We can respond on key routes but it is too complicated to do on every sector, so most global deals will be a combination of back-end discounts and net fares."

BA has a reputation for intransigence in its client dealings and this apparent case of a leopard changing its spots has accordingly met with mixed reactions. One travel manager who welcomes it enthusiastically is Tom Stone, U.K.-based global travel manager for Seagram and Sons. "The reorganization is a major step forward," he said. "The politicking that used to take place between account managers in the United Kingdom and sales managers overseas was very frustrating. You would get the German office saying it did not want to give a discount it didn't have to give in its own market. All that has been dissipated. I think this will make a difference--it is not just cosmetic."

Mike Platt, COO for Business Travel International, also has noticed a shift in BA's attitude to global deal making, but attributes it more to the buyer's market prevailing in corporate travel. "BA is waking up, but it has nothing to do with centralization of the sales structure," said Platt. "There has been a very recent but clear recognition by key airlines that it is time to start doing these deals and BA has moved a long way forward. It is a final recognition that the wish of corporates to negotiate a single contract is a trend that will not disappear."

However, there are some corporates who remain unhappy. BTN's International Travel Manager of the Year Thomas Faller, the global travel manager for ABB who is based in Germany, said, "BA seems to be looking at U.K.-based companies and has not prioritized large European companies at all. I have been waiting for 18 months to talk to Dale Moss. I have not seen any signs of the airline being more customer-focused."

A senior U.K. agent also displayed the traditional suspicion that much of the travel business harbors toward BA. Mindful of previous doomed attempts to build a global sales strategy--the last being in the mid-1990s--the agent said: "I have seen only a marginal improvement in competitiveness. Niels is very enthusiastic--he may well want to change things--but whether he can get people at the top of the airline to buy in is another matter. It is one thing to sign deals, another to make them work."

In the United Kingdom, meanwhile, travel agents will find out this week how BA plans to reshape its commission structure. The airline last summer moved from 7 percent to 10 percent and abolished incremental overrides as a temporary measure after the European Commission deemed its commission structure to be anticompetitive.