KLM CEO: Transparency Key
Amsterdam - "The cost of each booking channel must be fully transparent," said KLM Royal Dutch Airlines CEO Leo van Wijk, keynote speaker at this month's European Business Travel Association Congress. "Inevitably, this means that customers will remunerate the travel agents for their services and that airlines will stop paying commissions to travel agents." He added that global distribution costs and credit card costs "should be dealt with in a similar way" to ensure transparency of channel costs and to present competitive fares against low-cost carriers. Van Wijk, however, told attendees KLM "certainly will not" make available full inventory in all distribution channels." That is totally impossible if you want to optimize your sales," he said. Meanwhile, van Wijk suggested, "this is a good moment for companies to upgrade their travel policies. Quite a few have done so already," referring to the airline's redesigned European fare structure that replaced full economy with Europe Select Class. Van Wijk also cautioned that "overcapacity on a global scale is still substantial," while promising more customer relationship management development by KLM in the coming year.
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"Liberalization does not mean no regulation," said Monique De Smet, Europe regional director for the International Air Transport Association. "On the contrary: There is more regulation that leads to more costs." De Smet specifically pointed to the difficulties of proposed cancellation policies currently being evaluated by European regulators. "If a traveler flies Japan Airlines to Rome from Tokyo and the scheduled connection to Palermo on Alitalia is canceled, the traveler can get re-routed, get reimbursed for the Rome-Palermo leg or not go to Palermo and get reimbursed for the long-haul flight from Tokyo," De Smet explained. "That last option could be the death of interlining if Alitalia has to pay that long-haul segment." European regulators also are working on new rules for dealing with passengers with disabilities, as well as a compromise on two versions of a denied boarding measure. "We need to allow overbooking to allow for the flexibility of the business ticket," she said, "but we agree it should be kept at a reasonable level." Meanwhile, John Wilson, a European Commission official, said the EC currently is conducting a voluntary trial to measure customer performance, similar to the U.S. Department of Transportation's Air Travel Consumer Report that ranks carriers on on-time performance, customer complaints, baggage handling and denied bookings.
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There was much discussion about consolidation and competition and whether the former jeopardizes the latter. The debate largely centered on airline alliances (see stories, page 1 and 15), with John Melchior, executive vice president of Radius, stating plainly that "alliances do a lot of good, but, of course, they eliminate competition," despite contrary assertions by airline executives. Peter Bost, director of international development for ATP International, however, contended that corporations have plenty of choice in the current buyer's market. "There are more carriers than 10 years ago and more carrier concepts than 10 years ago," he said. Ian Nurdin, Nestle UK business travel manager, added that airline consolidation is stymied by protectionism within the E.U. that keeps struggling carriers independent. "That is not competition," he said, adding that consolidation also will impact travel management and car rental companies.
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Fred Könnemann, assistant director of Eurocontrol, Europe's air traffic control entity, said air traffic in 2002 declined 1.2 percent, the first yearly drop in history. As he wowed the crowd with a full motion representation of air traffic in Europe's skies, Könnemann predicted annual growth of 5 percent to 6 percent from this point forward. Gerlach Cerfontaine, CEO of Amsterdam Schiphol Airport, added that passenger volumes at major European airports have seen recovery since the war in Iraq. He also indicated that a new departures lounge at Schiphol would open in early 2005 and vowed to resolve by year-end nagging baggage handling software problems.
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According to EBTA officials, 140 people attended the conference. Nearly half were buyers, including representatives from Denmark, the Netherlands, Norway, Spain, Sweden, the United Kingdom and Finland, though the Finnish business travel association withdrew its EBTA membership at the beginning of the year.