UA To Retool Contracts: Transitioning To Share-Based Deals, Prism Data Collection

Elk Grove, Ill. -United Airlines next month will begin changing the way it contracts with all corporate accounts, switching entirely to market share-based agreements and a data aggregation process furnished by The Prism Group that is similar to Continental Airlines' Corporate Insight system. The new model falls under United's developing Corporate Solutions suite of business travel products and services meant to position it as "the airline of preference in the business travel community."

United, heavily reliant on business travel dollars and still deep in the red six months after Sept. 11, said the new strategy will rationalize corporate contracting by analytically determining discount levels and rewarding clients for moving share to United. Corporate Solutions cuts across all lines and will be applied to both small and midmarket accounts, where appropriate, and for multinational accounts that may contract with several members of the United-led Star Alliance. The program will launch in the coming weeks with seven or eight corporate clients and roll out to the rest of the airline's vast client base throughout the year.

Meanwhile, United is pushing hard to rebuild business traffic by extending for a second time its flexible Back to Business fares and boosting service between its Chicago O'Hare hub and numerous business destinations.

The carrier's move to share-based agreements reverses its practice of dubbing overall corporate relationships as "corporate volume agreements," while the decision to work with Albuquerque, N.M.-based Prism reflects growing marketplace acceptance of evolving data transfer processes (BTN, Aug. 14, 2000).

"What we were doing was really the Dark Ages in how we established corporate volume agreements," said Frank Kent, United vice president of North America sales and head of Corporate Solutions. "This takes us to a tremendously new level of sophistication and allows us to put meaningful programs in the hands of corporations."

United said its previous volume-based strategy was frustrating, highly dependent on the economy and, in many ways, irrational. "Finally, we are coming out of the fog," said United president Rono Dutta. "Before, anyone that was big got a discount without either party being aware of what each did to deserve it. Now, it's all really based on performance and behavior."

Not only does the new strategy reward travel managers who can influence behavior, but it also gives United the ability to determine market-specific corporate discount levels logically. "In markets we know we should have gotten the share anyway, we probably would not give the higher discount," Dutta said. "In the markets that are really important to us, and where we know you have gone out of your way to fly us, you deserve a higher discount."

Though United for years has had certain share elements included in some larger corporate contracts, Gabriel Eshaghian, manager of global airline and car rental programs at PricewaterhouseCoopers, said completely avoiding revenue requirements can help to protect both buyer and seller. "There are no guarantees in volume based-commitments. That has been proven recently in light of the economy and Sept. 11," he said. "We have all seen, however, that we can support a carrier based on share at the origin and destination level and on aggregate in competitive markets."



UA Turns To A Third-Party

In order to create the framework for all new and renewed agreements, as well as effectively automate its salesforce and monitor client performance, United turned to Prism. Despite early controversy among corporate buyers regarding data privacy (BTN, Feb. 26, 2001), Prism's data collection and standardization processes, used already by Continental Airlines and—to some extent—by British Airways, gradually is gaining popularity for its efficiencies.

On the front end, Prism typically will gather data from the travel management company working for a given United corporate client, normalize the data sets, mask certain elements, run O&D processing and send summary level reports to United. As they do within the Continental Corporate Insight system, these reports will delineate between Prism's client carrier and all "other airlines."

"We developed the Airline Data Transfer Protocol last year, which establishes a de-identification of key data elements—carrier code, ticket designator, validating carrier—all the things that people object to that would identify the carrier," said Michael Whitesage, president of The Prism Group. "Whether it is going to BA or Continental or United, all the data are appropriate for that contract and you can't drill into it and deduce, on the ticket level, what the carrier is or what the pricing is. What is happening is that travel management is being infused into the airlines rather than the other way around."

Whitesage added that system deployment at United is different than at Continental because "United is a very large global carrier in a complex environment with alliances. It becomes a way for them to automate and centralize information while maintaining the global and regional approach."

Once the system is fully developed on the back end, travel managers will access online reports to analyze contract performance by carrier, market and cabin. "This gives them real live data, which they can influence in order to earn higher discounts," Dutta said. "It really gives the travel manager more control over the eventual outcome, which makes sense for the airline, the corporate travel manager and the industry."

Most of Continental's corporate clients agreed, or at least have been convinced sufficiently of the privacy of the data, as more than 1,100 of them—an overwhelming majority, including some early dissenters—currently are flowing their data through Prism. "Some customers evaluated the importance of a Continental program and have heard from their colleagues that reports we provide are useful and that the data is treated with care," said Dave Hilfman, Continental vice president of multinational sales and revenue programs.

However, several Continental clients said that they still are waiting for the carrier to fully deploy online reporting. Hilfman acknowledged such capabilities, which already provide an array of pinpointed performance reports to some, are "not yet where they need to be," and that only 20 percent of its accounts are taking advantage of the functionality. "We still are working on the flown part with our revenue accounting department and with Prism," said Monisa Cline, Continental managing director of corporate sales. "Now, the data still is the ticketed information by departure date."

Whitesage confirmed that there has been no transfer of flown data from any of its airline customers to corporate travel managers. "What we can do is report what has been lifted," he said. "But the flown data is evolutionary. That is not a small feat and it takes a while to get that engineering down."

Meanwhile, some travel buyers may be hesitant to work with Prism, or simply are more comfortable with their existing third-party data aggregator. But Kent said Prism's model "will be unique to United Airlines," and brings to the carrier an end-to-end solution. "We did a lot of homework and due diligence, and decided the Prism product is exactly what we need for Corporate Solutions," he said. "And while Prism and Michael have great credibility, we took it to the next step and had our assistant general counsel get into it in detail to assure that our data is appropriate and that any involvement we have with any corporate entity is equally protected." Prism last year was certified by the U.S. Department of Commerce as a Safe Harbor for data transfer.

With the debate around the Continental system abating and United now onboard, industry insiders suggested that others are ready to outsource sophisticated data processes for the corporate market. "We have a number of additional people committed and in the due diligence phase, including major U.S. and foreign carriers," Whitesage said. "We are encouraged that the model is being accepted."

Northwest Airlines, which has shown interest in Prism, said only that its "selection process is ongoing," and confirmed that Prism is a candidate.

Meanwhile, United's Dutta said the concept of Corporate Solutions is similar for midmarket companies. "When should we give a discount to a midmarket company?" he asked. "Well, if they can influence share, it makes sense for them and for us. Now you have quantified benefits as to why it would make sense and it would tend to broaden the base." On the other side of the spectrum, multinational accounts dealing also with United's Star Alliance partners may begin to see added value in alliance contracting. Though individual travelers already may see benefits from flying with alliance partners, United acknowledged that data issues have prevented it from fully leveraging Star's network to drive corporate sales.

"When we put together corporate deals, we are better able to measure how much Air Canada did, how much Lufthansa did and try to put it together in a single package," Dutta said. "A lot depends on how we design the deal. Before, we couldn't start down this path because we didn't have the data to make reasonable assumptions." Whitesage said full data are not shared between alliance members, regardless of antitrust immunity.

Meanwhile, fixed fares on certain city pairs, a model favored by many companies in their attempts to accurately prepare budgets but recently downplayed by carriers due to economic uncertainties, are de-emphasized in United's new approach. "As we move forward and start the launch of Corporate Solutions, it will negate the need to get into as many fixed fare agreements that may have been in the marketplace before. This, in totality, will make a lot more sense than just going out and arbitrarily selecting markets that may have applicability for fixed fares," Kent said.



Traveler Developments Also in the Works

Mindful of business travelers themselves, United has included numerous time-saving developments in the wider Corporate Solutions initiative. "I think airlines traditionally have been focused on the onboard product, and the ground product—finding your way through the airport—has become a jungle," Dutta said. "It doesn't have to be such a jungle."

As such, the carrier offers automatic rebooking of canceled flights for most domestic operations and recently unveiled EasyUpdate, an enhanced system of proactive notification alerts and flight information messages delivered via the traveler's choice of wireless devices, phone numbers and other channels. It also has been deploying EasyInfo large-screen information displays at gate areas and EasyCheck-In self-service kiosks at numerous airports. "These 'Easy' products go hand in hand with the companion products aimed at the corporation," Kent said.

The carrier also is pushing hard to rebuild business traffic by extending for a second time its flexible Back to Business fares, which were introduced last fall to stimulate traffic and now are available through Sept. 30. On domestic flights, a 21-day advance purchase saves 50 percent with no Saturday night stay necessary. Similarly, a seven-day advance purchase provides a 25 percent discount, also with no Saturday night stay.

On the operations front, United is ramping up service between Chicago O'Hare and business destinations nationwide. Though there will be no net gain to United's system capacity, which in the second quarter still will be down 16 percent versus last year, the new schedule—effective June 7—features hourly service between O'Hare and eight cities, notably archrival American Airlines' Dallas/Ft. Worth hub. In addition, at least 10 daily flights—or "near hourly" service—will be provided to six other cities.