Some corporate travel buyers are finding limited success in mitigating the cost of checked-baggage fees through negotiations with their preferred airlines, and an increasing number plan to make that a part of corporate contracting discussions this year.
Most buyers claiming such successes largely are gaining reductions in checked-baggage fees by securing more frequent flyer elite status designations for their travelers, shielding them from such charges.
The outright elimination of the fees through negotiation remains elusive, but buyers, airlines and consultants said there are opportunities to turn soft-dollar benefits into hard-dollar savings. "We've not seen anybody have success in negotiating reduced or eliminated baggage fees across the board. Zero success," said Dan Pirnat, TRX Travel Analytics vice president and general manager.
Advito vice president Bob Brindley agreed, noting that some companies can "mitigate it somewhat" through status designations, but "not directly by negotiating it out."
One buyer for a Corporate Travel 100 company said that approach worked to mitigate some expenses. "We have not asked for baggage fees to be waived, but we have increased the number of elite levels to help offset some of the costs."
According to a BTN survey of 215 corporate travel buyers, 12 percent said they negotiated with their preferred carrier to "to reduce or eliminate checked bag fees in 2008." Nearly 32 percent of the respondents expect to do so this year.
Sources said technical issues at play can prohibit airlines from applying such fee waivers for a company's entire traveler population, since negotiated discounts are applied at the point of sale through the global distribution system, not at the airport where travelers ultimately pony up for their checked baggage.
"One challenge is just the mechanics of actually doing it," said Barry Rogers, director of TCG Consulting's air practice. "They already have it set up that if you have status they can waive the fee, but they don't have a mechanism to say that if you're an employee of this company, we can completely waive it."
Still, even if those mechanisms are in place, Rogers warned companies to take a close look at how much baggage fees actually eat into air spending. Rogers noted that many buyers would be loath to gain a reduction in baggage fees at the expense of a deeper point-of-sale discount. "It's important to realize that everything is negotiable, but every time you push one place that means a little bit less you can push someplace else," he said. "From the airline's perspective, anything they can do to put discounts into the actual price of the ticket helps the airline as well as the corporation because it reduces the apparent cost of travel. If you're looking at it in an online booking screen or agents are looking at it, then it's coming up lower-price. If you're negotiating away baggage fees, that doesn't show up at the point of sale."
As such, securing elite status that shields travelers from such fees has become the best workaround for travel buyers to mitigate the expense. American Airlines vice president global sales Frank Morogiello said the best way for corporate customers to avoid baggage fees is to attain frequent flyer status.
"If they have been able to mitigate it, it's because they've been able to negotiate more frequent flyer upgrades, which by their status allows them to waive the fee, not at the time of booking, but at the airport by showing their card or entering their frequent flyer number," Brindley said.
Such negotiated airline deal sweeteners are proving to have hard-dollar value.
"It is cost avoidance, but it is a hard-dollar impact," according to Brindley. "You have to take a look at these value-add areas. Clearly, the airlines would put a certain value on it, but if it's truly just used as a sales tool—while it may have a cost to the airline—it may not have a hard-dollar value to the client. In some cases, such things do have hard-dollar value. Baggage fees clearly are an example."
"Often, travel managers find it much easier to quantify the savings they deliver by putting it in front of the discount," Pirnat said. "It's fairly difficult to quantify any reduced baggage-fee benefits. However, reduced baggage fees are something travelers would feel more than a better discount."
Still, entering into contract discussion with preferred carriers, one Corporate Travel 100 buyer said, "Baggage fees are definitely on the table and will be something that we negotiate."
Though some buyers undoubtedly will attempt to make an outright waiving of baggage fees a part of those discussions, it hardly will be the focus, as negotiated fare pricing continues to dominate discussions between carriers and buyers. "Typically, that part of the negotiation comes toward the end. It's not an entry point, because you first focus on pricing," Brindley said. "Carriers typically will be very quick to match frequent flyer status if they're winning business away from one of their competitors. They'll say, 'You show me your 500 travelers that have premium status on carrier X and I will get all of those travelers premium status on my carrier.' That's the easy part to do."
Although baggage fees have drawn the ire of travelers and buyers, while defining a new revenue source for domestic airlines, several carriers and consultants said the first-checked-bag fee disproportionately affects leisure travelers, as corporate travelers are less likely to check a bag and more likely to hold elite status
(BTNonline, June 30).Brindley said an Advito analysis conducted for one of its clients determined that such fees affected less than 15 percent of their travelers, thanks to the company's reliance on higher-yield tickets and the elite status that a large portion of travelers already held. Furthermore, if a company's patterns tilt toward international travel, where first-checked-bag fees do not apply, they'd see less impact from the charges.
"Then, when you factor in those typical one-day or two-day trips, the vast majority of travelers won't check a bag anyway," Brindley said of domestic business travel patterns.
"The approach that I would recommend to travel buyers is to look at what issues are really important to them," said TCG Consulting's Rogers. "I wouldn't recommend someone go out to try to negotiate out baggage fees if it's not an issue for them and if there are other areas that are more critical."