Delta Air Lines' decision to eliminate its group and meeting sales products on Jan. 5 has weakened the benefits of choosing a preferred carrier for corporate group travel, according to meeting buyers, who said they often look for service and soft-dollar discounts in lieu of fare reductions. Other major carriers have retained their meeting products, but the erosion of customer service and incentives among all carriers has threatened the trend of tracking total group air spend for contract negotiations, they said.
Although some buyers said they haven't seen significant fare hikes on group business as of yet, they said transient corporate fares have begun to increase slightly and customer services and incentives have been greatly reduced.
"When you're going to commit 10 to 30 people on a flight, you expect better than market rate," said Terry Sullo, manager of travel and meeting services for Cambridge, Mass.-based Akamai Technologies. "We weren't getting it anyway, so in lieu of that you look for services. As long as the service level is there, then we can continue to put groups on airlines to give us some benefit."
However, both discounts and services have been severely reduced or eliminated altogether by major carriers, said Kim Tiberia, director of corporate meetings for The Travel Team, a corporate travel management company based in Buffalo, N.Y.
"Delta's new fare structure is taking away all of the reasons why you want to consolidate group business, such as the special discounts, the earned tickets for so many tickets you buy and the name changes. Those types of things that we were allowed in the past have now gone away," Tiberia said.
Delta's elimination of its group desk and group discounts makes it difficult for corporations to consolidate their group air travel, Tiberia added.
"It really goes against what corporations are trying to do, to manage and consolidate their meeting business," she said. "With no advantages to steer business to a particular carrier based on the concessions that are allotted with group travel, we're going back to people doing their own thing."
Other major carriers have not yet followed Delta's move to eliminate their group air desks
(Meetings Today, Jan. 17), and the fact that Delta has not released any reformed approach to corporate group travel has been surprising, said Andrew Menkes, chairman and CEO of Princeton, N.J.-based Partnership Travel Consulting.
"It's possible Delta's just taking this one step at a time. In the meantime, meetings do go on, and I'm sure that they'll negotiate ad hoc on a per client basis," Menkes said.
Menkes said all legacy carriers are "putting 100 percent of their focus on survival," and customer service has taken a lower priority. The fight for survival is also why groups have taken a back seat, he said, because from an airline's perspective, corporate group business isn't a sure bet.
"It's not predictable, it's not steady and it's the first piece of business to be impacted when there's any type of financial challenge to the company. The first thing companies cut is meetings," Menkes said.
Menkes said carriers have overlooked corporate groups because, unlike corporate transient travel, there is a degree of flexibility in meetings.
Some buyers said they are considering their internal structures to adjust to the fare reforms. Although negotiations for group and transient air travel are often handled separately, Cynthia Gillen, director of procurement and travel management for BDO Seidman LLP in Chicago, said leveraging the air spend together may be a better option.
"With the changes to many group options, and the introduction of corporate fare structures based on one-way rates, we are doing an initial assessment to see if we want to change how we manage our meetings patterns. There may be a situation where it could be beneficial to manage our spend through different channels, rather than a separate meetings and a separate corporate channel," Gillen said.
Not all buyers are seeing group discounts and incentives erode with their preferred carriers, and Gillen said BDO Seidman is considering pushing group-driven flexibility for reissues and itinerary changes for transient travel.
"There are elements that exist in group contracts that the airlines are well-equipped to manage that we would like to see integrated into corporate contracts that would help us manage our spend," Gillen said.
By reducing discounts and incentives, Sullo said major carriers are putting themselves in greater competition with low-cost carriers.
"It's commodity pricing. They keep saying they don't want to be priced that way and that's what they're doing to themselves," she said.
Some LCCs have stepped in to compete for group business. Although Southwest Airlines eliminated its meeting fares in 2003
(Meetings Today, Dec. 8, 2003), Tiberia said her clients have placed much of their group business on Southwest and other LCCs.
"It's not necessarily the discount, it's more the service," Tiberia said.
Service can make a big difference when choosing a preferred carrier for a corporation's group air spend, as discounts and incentives become increasingly harder to find, Tiberia said. "It's becoming quite a challenge because you're putting that much business onto a carrier and you're getting nothing for it."