United, Lufthansa Marketing Jointly To Buyers
<H1>United, Lufthansa Marketing Jointly To Buyers</H1><H3>By Amon Cohen</H3><I>London </I>- Less than two weeks after getting the green light from the authorities, Lufthansa and United Airlines have swung into action to cut joint deals with corporate buyers.
Almost anything goes, the two airlines say, as long as any business they conclude brings profits to both carriers as well as savings to corporate customers. They intend to start knocking on corporate doors around the world at the end of this month-giving British Airways a viable U.K. rival that can compete with it both westbound and eastbound.
At the same time, Lufthansa and United are laying plans to negotiate parallel joint overrides with agents and develop a merged marketing program for travelers. The intention is that by 1998, corporations and their travel agents will have a single deal with the two airlines, while employees will be members of a unified marketing program.
"We would like to have all three programs running together, but it would be OK for a client and its agent and employees to do them separately for the rest of this year and 1997," said Ans Dickie, Lufthansa passenger sales manager for London and southern England.
Dickie is a member of a worldwide Lufthansa-United working party that has been set up to establish a framework for joint corporate deals. It is one of seven working parties activated after the Department of Transportation provisionally granted antitrust immunity to a marketing alliance between the two carriers on May 20.
Other alliances that the working parties will explore include travel agency deals, technical operations and distribution cost savings. The latter group will consider issues such as merging reservations and ticket offices, sales forces and tour programs.
Although Lufthansa and United will remain independent companies, the airlines are allowed to consolidate sales and marketing activities, yield management and pricing (BTN, May 20). The only routes on which the two are not allowed to cooperate are Frankfurt-Chicago and Frankfurt-Washington because both carriers already operate services on them.
Dickie anticipates that a small number of joint corporate deals will be in place before the end of the year, most likely in the home markets of the United States and Germany.
"The emphasis is on the U.S. and Germany because that is where the largest profits can be made," she said. "We are looking at a number of buyers to see if they would like to revise their deals for the second part of 1996, but I think it will take a while longer to find the right corporate structures and the kinds of deals our customers want."
She refuted a suggestion by Rosenbluth director of supplier relations Mike McCormick, published in BTN, that the two airlines could use their position of dominance to beat up agents and corporates on price.
"That is very theoretical," she said. "Competition is so intense that if we offered a worse deal, business would not switch to us."
Mark Schwab, United's U.K. general manager, concurred with Dickie. "The alliance will allow us to be more competitive and offer more attractive deals to the corporates because we can give them a greater share of the market," he said.
Paradoxically, the international alliance does not yet feel ready to offer global deals to multinational clients. Instead, deals will be cut with both clients and agents on a country-by-country basis.
Neither Dickie nor Schwab felt qualified to comment on the specifics of the U.S. or German markets, but their work in the United Kingdom will bear a considerable resemblance to both home countries.
The United Kingdom is an interesting testing ground for the alliance because it is one of the biggest foreign markets for both airlines, is geographically located between their two home countries and is worth approximately the same in revenue to each carrier.
Schwab said the two U.K. sales teams were adopting a two-pronged strategy. "They are discussing which corporate clients they have under contract where they could add the transatlantic to a Lufthansa deal, or adding flights in Europe and beyond to our deals," he said. "At the same time, they are looking at a list of companies that have not signed with either of us previously because we didn't offer the breadth of service that we now have."
As to the nature of the deals that the alliance is prepared to frame, Dickie and Schwab have slightly differing opinions.
Asked whether deals would be based on volume, market share or even net fares, Dickie said: "We are very open-minded. We already do all three in the U.S. So long as it is acceptable to the customer and makes a profit for both airlines, we will consider it."
"We are not hung up on market share," Schwab said. "We just want more business."
However, he was more reticent about the hot issue of net fares. "We are tiptoeing around that," he said. "We have to make sure that the business comes to us. It needs to be proved that they can work for the immediate short term, and I don't see the alliance going that way at the moment."
Once the joint corporate deals are up and running, the U.K. sales forces will turn their attention to joint overrides for agents. These will be more complicated because override deals are more firmly entrenched for 1996 and there is a greater cultural difference.
"The structure of deals for transatlantic are very different from those for European business," said Schwab. "Instead of stapling two contracts together, we want to structure a brand-new deal."
Agents are likely to find that for them there will be greater emphasis on market share. But Dickie stressed that the alliance did not see itself as a bigger stick with which to beat agents.
"They shouldn't sit in fear thinking, 'oh God, here comes the Lufthansa-United alliance, this is going to cost me,' " she said. "They should look at the opportunities. Override agreements will be structured in such a way that if there is a larger share for customers, there will also be a larger share for their agent.