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Bank of America's travelers last year spent $1.4 million on ancillary airline fees, more than twice as much as in 2008, but its add-on costs per ticket fell to $28 from $33 thanks to manual data collection that yielded information key to contract negotiations, according to vice president and Americas travel manager Michelle Simmons. This week during a National Business Travel Association webinar, Simmons explained how credit card and expense management data helped identify not only top travelers, "but also those paying the most in extra fees and which airlines they are paying them on." The company then was equipped to negotiate elite-level status in airline loyalty programs that exempt many travelers from bag fees and other airline charges.
Simmons discussed a host of challenges presented by the ancillary trend, ranging from policy and reimbursement considerations and expense processes to tracking, measuring and negotiating. "We used to know quite easily how much we were spending on an airline ticket or what the total cost of the hotel room or rental car was," she said. "Now, we have to piece together these inflight and baggage charges, preferred boarding, GPS for rental cars, etc., in order to come up with total spend by supplier, which is what we really use in negotiations."
To derive meaningful statistics, Bank of America filters card and expense data. "The smaller charges that we'll see coming through the data--the $5, $7, $12 charges--are going to be the beverages, snacks and inflight amenities," Simmons said, "and then pull out the $11.95 and $9.95 charges, which are most likely the [inflight] Wi-Fi. And then we make additional assumptions on what the baggage fees are based on the charts [provided online by Smarter Travel]. And then you want to purge out any charges that are change fees or add/collect fees. We know the $150 or $200 charges are going to be the change fees, and then anything not ending in a .00 or a .95 or a .99 are probably add/collect fees. It is definitely a manual process, but that is what we go through now--clean out all that data we need to purge and keep what we think are the true unbundled fees."
She acknowledged that "there is a lot of work to run through credit card data" and that "not everyone is going to have the resources to dig in the way we are digging in."
According to Simmons' presentation, the $1.4 million total last year was spread across 10 airlines and about 61,000 segments.
"Based on the reports we pull, we will negotiate different levels of status based on [employees'] travel patterns and unbundled fee charges," she added. "With some of our airlines, as we completed our RFP in 2009 and negotiated [loyalty program] status matches, you can see where those negotiations have a positive effect."
For example, Simmons' presentation showed that Bank of America increased its segments flown on one particular airline, but bag fees and other charges were cut thanks to status matching. With that carrier, "We ended up reducing our unbundled fees on average by about $20 a ticket."
Looking ahead, Simmons said the company needs to start working with expense management systems to integrate new unbundling categories, update policies, "add or remove suppliers based on those taking an active role in supporting our program" and be vigilant on watching the ever-changing fee environment.
Taking Matters Into Their Own Hands
Simmons also made clear that airlines, which haven't yet supplied Bank of America with satisfactory data on ancillary charges, "might as well start doing it because we are able to pull it ourselves anyway. Working with us will be the differentiator on who are the stronger partners in our program."
Also speaking during the webinar, ARC vice president of marketing, sales and customer care Mike Premo said travel buyers won't necessarily get such support from suppliers. "There's a lot of clamor to negotiate these kinds of fees, and that probably does not make the airlines want to provide any more transparency or visibility into them than absolutely necessary," he said. "If you're an airline CFO, it's a problem already solved: 'I'm already getting the revenue from these kinds of fees. What is my motivation to spend a lot of money [to develop industry standards]?'
"Corporations shouldn't be lulled into a false sense of security that the card companies are going to provide access to this," Premo added. "There are a lot of different solutions and technologies out there being implemented around this, and it is understandable that the card companies don't really want to invest in this until they know there is a single standardcoming into place."
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