Global airline partnerships claim to have made great strides in advancing alliance corporate contracting, with more development on the way, but many corporate travel managers said they still see more hype than substance. Considering a history of alliance divorces, inconsistent corporate sales strategies and account management, yet another wave of newly announced partnerships and an imminent industry-shaking alliance decision in Europe
(see story), corporate travel buyers have reason for continued skepticism.
"It is a very mixed picture around the world," acknowledged Graham Atkinson, senior vice president of worldwide sales and alliances for United Airlines and chairman of the Star Alliance management board. "But there is no doubt alliance contracts are becoming more relevant. More and more Fortune 500 companies, primarily in the United States and Europe, proactively are asking for bids."
To handle the increased interest and drive value to the process, Star Alliance early next year plans to roll out a new payment and reporting system for corporate clients. Atkinson said a "small number" of corporations already have asked for bids based on that system. "The primary breakthrough is in data collection," he said. "We will use software to calculate relevant payments due across the alliance." He added that an internally developed Star Alliance engine backs the system, but such third parties as Prism Group or TRX Inc. could be used "for certain aspects that may plug into the process." Other details were not available.
SkyTeam, centered around Delta Air Lines and Air France, also is working to align corporate data aggregation, decision support and contract management systems. Once such sales support is in place, the alliance can progress further on corporate sales efforts, said Paul Matsen, Delta senior vice president of international and alliances.
SkyTeam already has moved beyond bridge agreements—which provided alliance incentives to clients that had met targets with the individual carriers—to what it termed bonus agreements.
"With antitrust immunity, we now can go to the client with one voice and coordinate incentive levels, which previously may not have been properly aligned," Matsen said. "The next phase is to develop contracts with one integrated target." He added that corporate contracting "won't ever be without issues," but noted that SkyTeam's "metal neutrality" principle fosters the one contract, one voice approach. "We are striving for that behavior with the salesforce, and we expect corporate contracting to pick up by the end of the year."
Metal neutrality refers to SkyTeam's recent revenue-share program that allows respective salesforces to sell the alliance's services without preferencing any of the member carriers. An internal SkyTeam sales document obtained by BTN, meanwhile, indicated that Korean Airlines "participates in antitrust immunity discussions and has enacted harmonized corporate pricing agreements" for traffic leaving the United States. Star Alliance members United and Lufthansa since January also have had in place a revenue-share program.
While there have been some examples of successful alliancewide corporate deals encompassing multiple regions, the pitfalls, according to many corporate travel managers, thus far overshadow potential benefits.
"As more carriers begin to talk about alliance deals, one has to consider that a 75 percent fair marketshare in an alliance deal likely will mean the contract will have a 99 percent share requirement," said a strategic sourcing manager at a multinational company. "Perhaps the discount will be better in an alliance contract than dealing with a carrier solo, but can you achieve higher compliance to fewer carriers? Will there be internal competition within the alliance? It may be 'all for one and one for all,' but at the end of the fiscal day, it's 'to each his own.' "
"When you add codeshare and alliance complexity, you need to understand fair marketshare in thousands of markets on a global scale," added Michael Boult, COO of Eclipse Advisors, a unit of Rosenbluth International. "With alliances shifting, what may be right on Monday may not be right on Wednesday."
Said Ian Nurdin, Nestle UK business travel manager: "I like to see which airline satisfies my needs, rather than which alliance it belongs to. If there are added benefits from the alliance, fine."
A commodity manager at another U.K.-based multinational company said his program has several strong country-specific deals with Lufthansa and that a Star Alliance deal would not add any benefit. "It simply would not make sense," he said.
"The seamlessness has focused on the end user, not the travel manager or the company negotiating the deal," said Kevin Iwamoto, global air and car supplier manager for Hewlett-Packard, speaking this month at the European Business Travel Association Congress in Amsterdam. "Antitrust immunity is great for the airlines, but I am not convinced it is good for the customer. If airlines jointly price, they are not going to budge."
Star's Atkinson said all blame should not be directed at suppliers. "Frankly, a lot of corporations say they want an alliance bid, but when it comes down to it, they want to nickel-and-dime and do things differently in different parts of the world," he said. "At least now we are moving toward the middle of the table."
Certainly there are alliance benefits already apparent to multinational travel managers. "It means fewer contracts and allows U.S. companies to have call centers outside of the United States," Iwamoto acknowledged. Customer service developments—including massive frequent flyer programs, joint airport lounge access and through checkin—also can make an alliance an easier internal sell with a company's frequent travelers.
Alliance executives also point to increased customer choice—in the context of larger networks for business travelers—and certain areas of progress in joint corporate contracting. "In some locations, like Switzerland and Belgium, many corporations have Star Alliance deals. In other countries, like in Scandinavia, with only two or three Star Alliance carriers there, it still needs to be developed," said Heike Birlenbach, Lufthansa general sales manager in Benelux and Star Alliance representative in the Netherlands. "We also are developing corporate deals here in the Netherlands. We already started on the agency side."
Meanwhile, Oneworld is developing more alliance deals, especially in Denmark, according to Marco van Naarden, a Cathay Pacific corporate sales executive. "Oneworld deals include individual targets and then overall Oneworld revenue goals," he said.