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Buyers Successfully Fortify Air Policies

By Jay Boehmer / March 15, 2009 / Contact Reporter
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Newly empowered to curb air expenses through tougher enforcement and more stringent travel policies, buyers are shifting travelers from business class to coach, increasing advance airfare purchases, taking advantage of promotional fares through spot buys and eliminating nonessential travel.

Buyers' success in curbing air expenses has been triggered by the deteriorating economy and consequent heightened senior management interest and traveler support.

"It's getting the focus of senior management," said Brent Eisenach, CWT Solutions Group global project manager of air consulting. "CEOs at Fortune 20 companies are getting involved. It's really going to the top."

"The economy has enabled these buyers to change around some policy and make changes that, quite frankly, have never been achievable in the past," said TRX vice president and general manager Dan Pirnat during a panel at The Masters Program in Washington, D.C., last month.

In some cases, the policy already existed, but lacked enforcement. Even those companies that aren't drastically revising policies are "making sure people are complying with what is already in place," said Travel Solutions CEO Tammy Troilo-Krings. "We've been having more conversations with our customers around compliance management and enforcement."

"It's really about ratcheting up communication to travelers who in this environment are more open to making changes to compliance in behavior," Advito vice president Bob Brindley said.

Whether through new policies or stricter enforcement of existing policies, CWT data show clients are booking more 14-day advance purchase tickets, which took a sharp turn upward beginning in November 2008. According to CWT, 14-day international advance purchase utilization shot up from about 50 percent in November to about 63 percent by the end of December. Utilization of domestic 14-day advance purchases also moved up, though by a smaller percentage.

Some buyers said they are increasing spot buys to take advantage of the wealth of promotional and leisure fares that have flooded the market, though airlines attempt to keep such fares out of the hands of corporate travelers through such restrictions as Saturday-night stays and advance purchase requirements

"If you book 14 days out, or even seven days out, you can take advantage of some of those," Brindley said. "Most clients are moving toward a lowest-airfare policy. Now, your program should position your preferred carriers to be that low fare if they have similar inventory available. That doesn't always happen. A lot of clients will also put a threshold where they want the lowest logical airfare, but they'd rather you take the preferred carrier if it's $10, $20 or $30 more. A lot of times that makes sense because many of your frequent travelers will have premium status on your preferred carriers and they can avoid some of the additional charges. You don't want to save $10 on an airfare, then turn around and spend another $25 or $50 on the bag."

According to client data, CWT said it has observed an 18 percent reduction in business class utilization for international travel from the fourth quarter of 2007 to the same period in 2008. "That volume is shifting to economy class—or economy plus on certain airlines," a CWT spokesperson said. "In fact, international economy class bookings are at the highest level in six-plus years."

"We've seen a number of clients adjust their policies in terms of class of service, in some cases by extending the travel time required to move into business class," said Brindley. "They're going to look at the big-price tickets first to see what kind of change they can make. If you move from a business class ticket—even with a discount—and to a discounted economy ticket, that's a significant change and significant savings."

Travel buyers from Visa, Schering-Plough and PricewaterhouseCoopers during a panel discussion at the Masters Program all noted a reduction in travel transactions by double-digit percentages and new actions to curb travel costs.

Schering-Plough director of travel Christopher Allen said, "We looked at everything from policy to supplier agreements and service providers, and we got a lot of support from very senior levels. We have made some changes," including new policies, supplier changes and shifts in marketshare agreements.

Allen said the company is vetting trips that "are not business-critical," in addition to trading down in some hotel tiers and classes of air travel. Allen said in April last year, "somewhat ahead of the economic curve," the company changed its business class policy.

"About 86 percent of our travel was in business class to Europe. In the very first month, that number went down to 6 percent in business class," Allen said. Though he noted what he called "exception creep" has more recently brought that number closer to the "40 percent range in business class," the company is "still significantly lower than where we were."

Among other effects of the economic environment, PricewaterhouseCoopers director of strategy and continuous improvement for U.S. travel Kim McGlinn noted a "greater exposure of data to senior leadership," which has taken heightened interest in travel expenses—and increased support for curbing them.

Pirnat said newfound empowerment among buyers to change and enforce travel policy is "great news from a buyer perspective," but "from a supplier side, it's disconcerting."

Major domestic carriers, in presenting their fourth-quarter financial results, noted growing evidence of premium class pullbacks, tighter travel policies, increases in advance purchases and sustained weakness in business travel demand
(BTNonline, Jan. 29).

Schering-Plough's Allen said increased scrutiny is not limited to what are considered high-ticket items like airfares, but filtering into every component of the trip. "Air only makes up 20 percent of our T&E costs," he said. "To look at air only would never get us to our goal." Allen said such actions include "pushing people towards" lower-tier hotel options.

"Through policy changes, we've eliminated some car services previously seen as an entitlement within our organization," Allen said. "Even our restaurant spending—we're taking a real close look at where people are eating and what we're spending on it because it's a large component. When you put that number in front of the CFO and look at how much you're spending at restaurants in our industry—and it's necessary to some degree—it's a big number, but it's also a big opportunity."
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