Two years ago, eBay manager of global travel and supplier management Laura Hodgkinson faced a common problem with her air program: "Management asked the question, "What are we spending on ancillary fees?'" As many travel procurement professionals know, the answer was buried in a multitude of expense reports, captured only partially, if at all, through travel management companies and credit card data, or through reports provided sparingly by U.S. airlines.
The question sent Hodgkinson down a path that resulted in homegrown and supplier-assisted changes to her Concur expense-reporting tool, through which travelers could more accurately file miscellaneous airline expenses using drop-down menus. Following several refinements to its approach and subsequent companywide adoption, Hodgkinson in April told attendees at the Association of Corporate Travel Executives conference in New York that she now has an answer to management's question: In 2010, eBay spent about $211,000 on ancillary airline fees--a figure she plans to use as leverage in airline negotiations this year.
No Silver Bullet, But A Silver Lining
Most have yet to nail down such a precise number. Lacking comprehensive solutions for reporting ancillary airline purchases, Hodgkinson and other corporate travel buyers have taken several approaches while some suppliers have instituted stopgaps to help clients understand what lurks in the fringe of air spend. What buyers need on the reporting end of the fee trend is systems collaboration at a minimum, if not also standards.
Although progress in a related Global Business Travel Association initiative has stalled, and airline industry standards enjoy only limited use, hope remains that collaboration across sectors is possible. One effort between payment provider AirPlus International, travel booking and expense system provider Concur and Continental Airlines--originally called the "party of three"--aims to develop better ancillary fee data reporting through charge card data.
[PULL_1]That group now includes Continental merger partner United Airlines, MasterCard and another unidentified carrier. According to participants, the goal is to develop a way for airlines to code ancillary fees in a format that can be captured by charge cards and seamlessly passed to expense-reporting systems.
"We're not trying to develop industry standards or anything more grandiose than being able to prove that when people with the intention of trying to make this work put their heads together, technically and commercially, you can make this work," said AirPlus president Richard Crum. "It involves a lot: You have an airline at the front that has to be able to capture these different fees and present the data in a certain way. There needs to be a way to transmit that data through, so we've worked with MasterCard--the network we issue our corporate card on--to understand how we can use some of their data formats. At the end of the charge, you have payment and expense. We've worked on ways to take the data and be able to present that to customers in our reporting."
United director of global accounts Cyndi Hunter recently stepped down as co-chair of the GBTA task force, which was formed in July 2010 to "develop a best-practices proposal about the improvement of airline data submission to credit card companies." When it announced that task force, GBTA (then the National Business Travel Association) sought "enhanced corporate reporting on ancillary fees, regardless of purchase point."
Hunter last month suggested "it's much easier to accomplish things in a smaller group versus a large group." Regarding the AirPlus-Concur-United initiative, she said, "We continue to be in a fact-finding mode, but we've been able to identify a couple of different paths that we could go down."
Hunter and others were optimistic that lessons learned in the working group could be shared across the industry and potentially adopted by other airlines, card companies, expense reporting systems and, ultimately, corporate travel buyers.
Noting that many ancillaries, including inflight Wi-Fi and meals, are not purchased at the initial point of sale, Hunter said credit card data became the suitable approach as it collects information on purchases throughout a trip.
Sources said broader adoption of enhanced reporting would require buy-in, development and dollars from a number of industry constituents, including airlines, credit card processors and charge card companies. Hunter highlighted the complexity using the familiar example of checked baggage fees: "There are probably 100 different ways that airlines describe bags. What we're trying to do, at least with Continental and the new United, is determine what the appropriate codes might be. The implementation of that might be some time, but we at least have our assessment of what might be good, descriptive coding for the top ancillary fees."
Speaking at the ACTE event in April, Concur senior director of analytics and travel vendor relations Ellen Trotochaud said there are "a lot of dependencies" throughout the process. "The processors have to make a change, the credit cards need to make a change, the airlines have to make a change," she explained. "A lot of that holy grail is in the credit card data, and it's just a matter of getting all those different stakeholders to work towards changing the specs."
[PULL_2]EBay's Hodgkinson noted that the solution her company developed is not a perfect one, but as a client of AirPlus and Concur, she was awaiting advancements that will further automate charge card data feeds into her expense system.
Stopgaps And Sundry Solutions
Workarounds have emerged from various corners of the industry. Among those, Continental developed a way to track some ancillary purchases by matching corporate identifiers with travelers' frequent flyer numbers--an effort that will expand to United. Concur created a method similar to eBay's solution that can help companies identify whether that $15 airline charge was for an in-policy bag or out-of-policy drink on the plane. AirPlus, TRX and others also have developed ancillary-fee reporting tools.
Details on baggage expenses are part of regular Continental reports sent to corporate clients that also include on-time performance and upgrade counts. Though no timeframe was given, Hunter said, "The new United sales team is absolutely focused on being able to deliver that type of reporting."
"If a company is contracted with subsidiary Continental today, we can produce reporting that shows all the elite [loyalty program] members and how many bags they checked by category, so you can see how much money each group saved by being elite," Hunter continued. "We added a component that showed if you were a Chase cardholder and got that bag fee waived. But most importantly, we can show how many were non-elite and actually paid for a bag. We can assess by company, and by whatever timeframe they want to report on, how many bags were checked and what that cost the company."
Delta Air Lines also is sharing similar traveler data with some corporate clients. Speaking in April during the Institute for Supply Management/Global Business Travel Association Travel & Meetings Summit, WellPoint strategic sourcing manager Cindy Heston said the carrier "is tracking through the trip, not the ticket, where my travelers are paying and what they're purchasing."
She later explained to Procurement.travelthat Delta asked her for a wish list regarding the traveler data she wanted, which included loyalty program status, the employees who received class of service upgrades or had problems and were reaccommodated. "It was shocking that they didn't say, 'We can't do that.' They said, 'That's exactly what we thought.' " In January, the airline started sharing those reports.
Separately, "Concur does allow you in the expense module to identify the charges coming in through an airline-based merchant and you can even designate what fees might be considered ancillary versus ones that you might want to tie to the ticket," according to Concur's Trotochaud, speaking during a March PhoCusWright webcast.
Trotochaud acknowledged that Concur's solution lacks automation; it requires travelers to categorize expenses. "As the industry is able to provide more detail about those transactions, then this process will become more automated, and we'll be able to have a much broader view about the spend that is happening throughout the lifecycle of the trip," she said.
AirPlus also has been working on new reports, which at press time could detail airline data on more than 100 different fees. "We're testing that with a few of our customers right now," Crum said. Once proven successful, the reports will be made available to all customers using the AirPlus MasterCard.
TRX offers its TravelTrax data-reporting platform as yet another way to measure the ancillary impact. "If this is something you want to track, measure and analyze, you're going to need a number of data sources to do that," said TRX vice president of business intelligence and consulting services Tom Tulloch during the ACTE conference. "Obviously, card and expense data are critical. Combine that with back-office agency data, and you're going to have the clearest picture you can find."
Other Standards Stand Still
As suppliers build systems and processes to better serve their customers, other industry efforts are underway to develop standards for bringing ancillaries to the point of sale and monitoring transactions through the lifecycle of a trip. Real-world use, however, remains limited.
The International Air Transport Association's electronic miscellaneous document has yet to be embraced by a U.S. carrier--at least not for use by travel agencies. The Airline Tariff Publishing Company's optional-services fare-filing system for carriers has witnessed no growth in participation since its implementation more than a year ago. Still, advocates of those solutions remain optimistic about eventual adoption.
"It's still very early in the process," Trotochaud said during the PhoCusWright webcast. "It took the industry about 13 years for e-tickets to become really fully accepted and automated. We might not see 13 years go by, but I think there are a lot of stakeholders in the ancillary fee environment that have to do work to accommodate these standards. So, first there are some standards that have been recommended, whether you're looking at the ATPCo codes, which are probably the most widely accepted, or IATA codes, and using ARC's EMD process. There are some standards that are beginning to be defined."
If It Can't Be Measured, Can It Be Managed?
A presentation last fall by AirPlus executive vice president of strategic partnerships Aaron Kelling cited various industry studies, including those from GBTA and TRX, that showed a cost impact of ancillary fees ranging from 1 percent to 30 percent of air spend. A Concur study pegged the number at 2.3 percent, while Travelocity Business has suggested add-on air charges could comprise up to 10 percent of the airfare. The true number varies by company and is contingent on a number of factors, including the nature of travel policy, patterns of travel, types of fares purchased and frequent flyer status of the demographics and behaviors of the traveler population.
TRX's Tulloch said travel buyer responses to the issue cover the gamut. "Some people are studying the problem," he said, while others have concluded that "if it's only 1 or 2 percent, who cares?" Some buyers are waiting for the "silver bullet," a reality that he did not anticipate anytime soon.
One participant during the ACTE conference asked if the industry is "overemphasizing" the importance of ancillary airline fees, given the magnitude of hotel and rental car fees. "I look at air, car and hotel and we actually had more hotel ancillary fees," eBay's Hodgkinson acknowledged.
"With hotels, we've been doing this for years: negotiating breakfast, Wi-Fi, parking and a variety of other things," added WellPoint's Heston during the ACTE session.
New reporting solutions may help some corporate travel buyers negotiate discounts for ancillary airline items. Nearly 36 percent of 138 corporate travel buyers polled in February and March by Business Travel News tried to reduce or eliminate checked-bag fees in 2010. About 14 percent of those respondents said such negotiations were successful.
Ancillary airlines fees can add up to big numbers. At Oracle, they amount to $100,000 quarterly, according to global travel operations manager Rita Visser. "We continue to have conversations," she said of airline negotiations during a January GBTA webinar. "I honestly don't think the airlines themselves know enough about what it's going to be long-term. They're enjoying the cash in their pockets now, but knowing that we as an industry are asking questions about that cash in their pocket and that the government is asking questions about that cash in their pocket, they're trying to get their arms around what they do with this and what their customers need to see."
One negotiating avenue for reducing bag fees has been through frequent flyer status designations. Elite-level status usually exempts travelers from such charges, but according to some travel buyers, airlines have been less generous in granting it to corporate traveler populations.
~ Jay Campbell and Mary Ann McNulty contributed to this report.