Air travel typically is the largest single cost within a corporate travel program, but it's not any easier to hit the bull's-eye on a big target. Globally, and especially in the U.S., carriers have consolidated significantly over the past decade, leaving fewer players with which buyers can negotiate. Even as global air demand has continued to grow in recent years, however, building corporate travel share remains a priority for most carriers, as business travel generally brings more premium traffic and higher-priced fares than leisure. At the same time, the onus is increasing on buyers to show they can provide volume and drive compliance to preferred carriers in order to get the best deals.
I. Before You Commit
Most corporate discount deals are measured on market share, but buyers can gain leverage if they have high-yield spend like first or business class or full-fare coach available to shift to new suppliers. Airlines also desire discounted economy or lowest-logical-fare business, providing it's business the carrier would not receive without offering discounts. Considering that suppliers are consolidating, commit only to the share you can manage. Many companies overcommit, and then underperformance puts their airline programs at risk. Discount programs are structured based on opportunities. Consider a few hundred thousand dollars as a minimum for the U.S. point of sale, though your agency can provide more exact benchmarks. If your volume does not meet the minimum, look into revenue- or sector-based incentive programs for back-end rebates, club passes, waivers and favors, upgrades and/or frequent-flyer status. Also look into the small-business programs some carriers offer. Some travel management companies also provide their negotiated discounts to their customers, particularly with international carriers. Determine whether HR, frequent-flyer loyalties and other costs of implementing preferred airline agreements are worth the benefits.
- Estimate your domestic and international air volume for the next year based on last year's numbers and the company's business plan, such as M&A, new product lines and new locations. Consider air volume for meetings and internal trips like training. Remember that volume ultimately is determined by business dynamics and the economy, not the travel manager. Airline usage also is determined by origin lift, especially for travelers based on airlines' hub cities.
- Ask frequent travelers which airlines they use and why, assess frequent-flyer memberships, understand which air and ground amenities matter to travelers and determine travelers' willingness to support a preferred airline program. Use loyalty to improve production on your preferred airline or airlines.
- Determine the value drivers of your company and search for the most suitable program. Make sure the deal will satisfy your company's safety and security requirements, as well. In considering requirements, be sure that your travel policy can support the deal you are considering or can be changed to support any discounts you will need to promote in order to satisfy the commercial terms of the agreement.