- The Association of Corporate Travel Executives during its global conference here last month continued to press its message that the International Air Transport Association must relax outdated regulations that hamper business travel.
Members of an ACTE task force cited research showing those rules are costing corporations in Europe hundreds of millions of euros annually in unnecessary expenses. They also are working to determine the rules' cost to U.S. corporations.
"IATA was chartered in a time when each country had a national carrier, when borders were tightly controlled and when protectionist measures were common," said task force co-chair Cheryl Hutchinson, a customer advocate with Travelocity Business. "We're at a different point in history now. The European Union was formed as a borderless economic power to stimulate trade. IATA regulations, many of which were written nearly 50 years ago, do not support that concept." IATA regulations also have an impact on companies in the United States, she said. Anyone traveling for a global or multinational company incurs unnecessary processing costs and additional ticketing expenses when booking outside of the country of origin. ACTE is devising a model that will allow travel managers to plug in their data and determine this amount.
Task force co-chair Mike Platt, managing director of BTI UK, discussed the number of direct and indirect costs business travel incurs in having to comply with certain IATA regulations. Many costs, he said, are a result of airlines often wanting separate country IATA numbers, licenses and printers to track and record client deals. A company with business in several countries must have national/local licenses and printers in those countries, as well as staff and facilities. For example, a company doing business in 38 countries would pay more than €600,000 for 38 licenses and printers, as well as facilities, staff and technology; using a single center would cost only about €334,000.
To ensure companies get the best fares, Platt said, local ticketing must be implemented. Ticketing outside the country of origin yields higher fares. He views IATA as a servant of the airlines, a vehicle to pass and protect rules, but with blurred responsibility and accountability, "possibly indispensable," but "in urgent need of total overhaul and refocus. The market has changed, but IATA has not."
IATA, based in Montreal and Geneva, is a 274-member airline trade association whose mission, it states, is to "represent, lead and serve the airline industry." Its main purpose is tied to infrastructure, standards and distribution systems. "IATA performs important tasks, is totally controlled by suppliers, mystifies decision making and is unable to reform itself," according to Platt. Further issues to be aware of in dealing with IATA regulations include currency implications with regard to ticketing, complicated fares, fragmented and arcane rules, bank settlement plan anomalies in accounting and disputes arising from unilateral charging, Platt noted.
ACTE is encouraging its members, as well as the industry at large, to pressure IATA to expedite regulatory changes, calling for a multifaceted plan of action to raise awareness of the regulatory impact of IATA regulations on corporations, including the estimated financial impact.
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In an open forum with the Transportation Security Administration, TSA director of stakeholder and industry affairs Clint Fisher briefed attendees on the agency's short- and long-term plans with regard to traveler safety, airport security initiatives and data collection issues. Fisher said the security agency is preparing itself to handle the imminent return of travel to pre-Sept. 11 levels by as early as next year, as well as the projected growth of travel in the coming decade. He said domestic pre-9/11 traffic levels are expected to return by 2005, while the number of international passengers to/from the United States will return to pre-9/11 figures by 2007. Furthermore, he said, airlines enplaned 641 million domestic passengers in 2003, and that number is expected to jump to 1.05 billion by 2015. Fisher said TSA is committed to one of its top initiatives: developing CAPPS II, the second-generation computer assisted passenger prescreening system, to reduce the risk of terrorism committed by terrorists boarding planes posing as passengers.
Audience members asked Fisher why TSA is continuing to devote significant resources and money to develop CAPPS II, while all commercial airliners now are equipped with hardened, bulletproof cockpit doors, federal air marshals travel aboard every flight and many pilots now are armed, yet most of the cargo being shipped on commercial airlines is not screened for explosives. Fisher said TSA has developed an Air Cargo Strategic Plan, which includes an automated "known shipper" database to enable airlines to know the status of a specific shipper before accepting cargo. Since Sept. 11, 2001, the government has prohibited all cargo from "unknown shippers" from flying aboard passenger aircraft. Fisher said it is not possible to screen all cargo for explosives and attempting to do so "would shut down the air cargo industry," and reiterated that TSA is resolute on moving forward with CAPPS II. He said research is being conducted to develop a system to encode CAPPS II data into the boarding pass, including such passenger name record information as full names, date of birth, home address and phone number.
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The impact on travel buyers of the approaching deregulation of global distribution systems also was much discussed. Beginning in August, the U.S. Department of Transportation will lift restrictions on display bias, parity and Web fare access, but still allow the sale of management information data tapes. Doug Weeks, senior manager of global travel for Booz Allen Hamilton, said, "just as it would be premature for anyone to be buying new furniture for the White House, it is too soon to tell how this issue will be resolved." While he is concerned about bias and content, "For now, we're going to leave the GDS decision to the travel management company."
"We pushed hard for deregulation," said Kay Urban, president and CEO of Amadeus USA, who anticipated GDS deregulation will come to Europe in 2005 and noted Canada is still in a discovery phase. The result of GDS regulation will "make us focus even more on bringing benefits to the customer. You'll see us work to pull more content in and to pursue value-based pricing," she said.
The topic came up again in a general session with Continental and Northwest airlines' CEOs Gordon Bethune and Richard Anderson. "Nobody wants to pay GDS fees," Bethune said, "That's not a long-term business to be in." Anderson said those fees are declining, but he warned the audience to "watch out for bias and the GDSs going back to pre-1992 behavior." Both CEOs rejected the notion that airline distribution dealerships would evolve. "Cost pressures attack non-value-added expenses, so any intermediary is not the way we are headed," Bethune said. "Instead, we are looking toward direct access." Bethune's biggest concern is about oil, which "went to 40 percent higher than the five-year average." In such an environment, he said, Continental will not be able to show earnings on an annual basis. "Oil prices are artificially high, and we are still waiting for them to come down."
Anderson said demand is picking up, but that "oversupply is driving prices down." He said 2004 is the first time in years that the majors are growing in capacity because "the majors are not conceding marketshare" to the low-cost carriers. "We're not going to sit by and let them buy our customers from us," Bethune chimed in. While the country needs the hub and spoke system to provide service to tertiary markets, he said the status quo is not sustainable. "It's not necessary or advisable to save everyone," Bethune said. "Darwin was right."
In response to a question about whether they will follow the example of America West and others in eliminating the Saturday night stay requirement, Anderson said, "We will price to remain competitive." Said Bethune, "I thought we were doing them a favor by offering the Saturday night stay discount."
Asked whether they expected low-cost carriers to compete for international routes, Anderson said, "There are no 30-minute turns in international operations. It takes 90 to 120 minutes to turn international flights around." Despite the unsound economics, Bethune said, "You can bet someone will try it."
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Two back-to-back sessions, How Will Touchless Touch You, were devoted to the challenges buyers face in getting travelers to use online booking tools without falling back on telephone calls to the agency or fulfillment center to make changes or even just confirm arrangements. Because of the transaction fees triggered by such calls, many buyers are seeing the cost-savings inherent in their online deployment drastically eroded.
Panelist Mary Kay Bellersen, Citigroup vice president of corporate travel, said calls to her online tool's help desk are a serious problem. "While the percentage of online adoption, which we first introduced in 1999, has grown consistently, so have the calls to the fulfillment center. Just calls for password changes amounted to 100 a day at one point. Travelers have to be clear when it's appropriate to use the fulfillment center and when it's not. This goes back to the question of which trips they are to book online and which are too complicated." Yet, the fulfillment center also is culpable. "The staff has to better understand the tool and how we've customized it to suit our needs. No one wants a help desk that can't help," she said. Bellersen noted that travelers were warned either to remember the password, or "we'll charge you to change it."
"The level of touch determines the cost because we have to pay people to do the work," said panelist Arlette Nakhjavan, American Express Corporate Travel vice president of North American operations. "Yet, the more people touching the process, the greater the chance of error."
Buyers have a right to wonder why they are not seeing the cost savings they were promised when rolling out online tools. "Companies have high adoption, but just are not seeing the improved return on investment," said panelist Harriet Washburn, director of national accounts for Orbitz for Business. One frequent issue, she said, entails quality control efforts. "Travel counselors will double check online transactions in the name of quality assurance," she said. "Double work translates into double fees."
Password changes notwithstanding, Nakhjavan enumerated a number of other frequent reasons travelers who have booked online reach for the phone. "They want assistance en route. There'll be a change in plans and travelers have no access to the Web, they need copies of lost invoices or the site has gone down," she said. Likewise, travelers will call to confirm flight information.
In working with their agencies and fulfillment centers, Nakhjavan recommended that buyers negotiate pricing models that build in performance guarantees and incentives to discourage call volume: "If you can get to a certain level of touchless transactions, the agency gets a break financially."
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ON Semiconductor's strategic sourcing manager for travel and telecommunications Colleen Guhin this year became the first recipient of ACTE's Lifetime Achievement Award. A corporate travel veteran, Guhin was recognized by ACTE for her contributions to the industry both as a driving force within ACTE in the past decade as well as her 16-year career as a travel manager at such companies as Texas Instruments, Motorola and most recently its spinoff, On Semiconductor, where she developed a successful travel program from scratch (BTN, Nov. 10, 2003).
Guhin also helped expand ACTE into Europe and drove change to ACTE's governance structure by cutting the size of its board and limiting board terms to two—a move that last year actually pushed Guhin out of an official position at the association. BTN in 1996 recognized Guhin as Travel Manager of the Year when she headed the corporate travel department at Texas Instruments (BTN, Aug. 19, 1996).
ACTE also presented Sony Music Entertainment's Howard Brooks with the 2004 Advancing The Industry Award for successfully incorporating procurement into Sony Music's corporate travel program and garnering high online booking adoption. During a session called Transitioning To Strategic Sourcing: A Travel Manager's Road Map, Brooks likened the job to that of a marriage counselor joining two seemingly disparate disciplines to yield a fulfilling relationship. "It's an arranged marriage, but you have to join the two philosophies, otherwise it will not work," he said. BTN last year recognized Brooks as a best practitioner for his efforts in driving booking compliance (BTN, July 21, 2003).
Meanwhile, the ACTE President's Award for the United States and Canada, which recognizes contributions to the association during the past year, was presented to Scott Guerrero of Maritz and Bell Canada's Richard Robert.