Many corporate travel programs will emerge from the Covid-19 crisis with millions of dollars' worth of airline vouchers or refunds, which will require keen data management and close cooperation with airline partners.
For now, many buyers simply are trying to get through the next months of disruption, trying to get what compensation they can for flights that already have been booked for business travel or events that no longer are happening.
"You don't want to have these tickets to go on for so long that they expire," said Aon global director of travel operations Hillary Dallas. "The firm has paid for them; travelers have expensed for them. We don't want to lose money from expiring tickets."
Some buyers told BTN they have at least $1 million in unused tickets.
As airlines grapple with the same issues, policies across carriers are changing rapidly, sometimes on a daily basis, FairFly VP of marketing Chris Ulph said.
Policies are changing even with flights that have been canceled by the airlines. While the U.S. Department of Transportation last week put airlines on notice that they are required to offer refunds if a flight is canceled or changed outside a reasonable window of time, airlines still are fiddling with that window or are looking at such options as providing vouchers that eventually revert to refunds should they not be used. Some regulators outside of the U.S.—such as in the Netherlands, Canada and Colombia—have modified requirements to allow for vouchers, at the urging of the International Air Transport Association.
MediaKind global travel manager Amber Lee said the largest U.S. carriers to date generally have been accommodating. "It used to be, 'We're extending the date.' Now they're saying, 'No cancellation fees, you can credit it, you don't have to book your next flight right away, or you can change your name on the ticket,' which they never do," she said. For smaller airlines, though, "there is a higher cancellation fee. They are just saying you're … out of luck."
For some, third parties are involved. "An executive assistant used a third-party meeting planning company, and that company put the tickets on their credit card and then invoiced us for them," one buyer told BTN. "So any refunds by the airline would go back to the meeting planning company, and they would have to pay us back."
FairFly has deployed a module that tracks refund policies and potential refund amounts based on a company's passenger name records. As an indicator of policy changes, data run on a group of FairFly clients showed that from the 60 days beyond April 1, clients could recover about 64 percent of their air spending through canceling flights. By comparison, in the same period a year ago, only about 30 percent to 40 percent would have been available to recover. During the 60 days prior to April 1, clients were able recover 76 percent of air spending through cancellations, according to the FairFly data.
"The difficulty for our corporate clients is that they can't keep track of all these policies, so we thought we'd do some spoon-feeding," Ulph said. "Because we have this data, and we have fare classes and fees, we can predict the net result of this."
Being able to track what is refundable enables buyers to triage massive amounts of tickets they would either need to deal with themselves or turn over to their travel management companies, which likely are operating at lower staffing levels at the moment, Ulph said.
While it's clear why some airlines at the moment prefer vouchers to refunds when possible—IATA has estimated airlines' liability for refunds globally at about $35 billion, as they already are struggling with liquidity given cratering capacity and demand—many corporations will want to avoid them. Besides the challenge of managing them, many businesses are undergoing their own financial strains at the moment and could use the cash, Advito VP and global air practice leader Olivier Benoit said.
"A large corporation that spends $50 million a year and has $10 million in value vouchers might just say, 'Let's just use it,' " he said. "Some others could be in the position of needing the cash and also be at risk of survival, so most of them probably will not be willing to be the bank of the airlines."
Companies with clout with airlines might find success in converting vouchers to refunds at the negotiating table, he said.
"The corporate segment, after the crisis, will remain the most profitable segment for airlines," Benoit said. "Even if for a couple of months, the pricing is low to get people back on board, it's still strategic revenue for airlines, and I don't see airlines going to war with their most important clients."
Instead, airlines likely will push the voucher strategy more aggressively with leisure travelers, Benoit said. Small- and medium-sized enterprises will find themselves somewhere in the middle, although those who lean on a TMC might gain extra leverage in negotiating, he said.
Incorporating the TMC
Some U.S. TMCs have structures in place to manage clients' unused air tickets, but the current volume of unused tickets has no precedent, according to Jo-Anne Lloyd, a partner at U.K. travel consultancy Nina & Pinta. "This isn't something we didn't do before," said Dallas. "We just have never been saddled with the amount of tickets in February and March."
However, in Europe and other parts of the world, unused ticket management is not a regular practice for TMCs and corporates, according to Lloyd. "The mechanisms for tracking and using those are not as established as they are in the U.S. market, which makes it really challenging," she said. "For a customer, they need to look at forward-booking reports and things like that to gain a lot of sight on that."
Complicating the situation are the layoffs and furloughs reported at several TMCs. "With support staff being laid off or furloughed at TMCs and frontline staff being reconfigured, it is very important to review all this with the TMC and ensure that processes are improved where necessary or simply maintained in the new environment," said GoldSpring Consulting partner Neil Hammond.
Handling vouchers will require a form of "reverse triage," prioritizing vouchers with the earliest expiration dates. Even though airlines in many cases have extended those dates well into next year, it also will depend on to what degree a company's own travel rebound is happening. As with potential refunds, Ulph said he expected airlines to be flexible on terms with corporate clients.
"If things are all expiring in a short amount of time and no one is traveling, they might be able to go to the airline and maybe offer 5 percent of the tickets' cost to extend the vouchers for a year," he said. "Nothing will be off the table."
Thinking Ahead
One major issue for buyers is how to allocate unused tickets for when travel resumes.
Some buyers are confident there will be so much pent-up demand that travel quickly will resume to its previous level. "So far, we haven't made any decisions on unused tickets, but we'll keep doing what we've been doing: Have the employees reuse them within 12 months," said Bristol-Myers Squibb global travel analyst Ivanna Downes.
"We anticipate business travel to resume by quarter three, and we believe unused tickets will be used then more than ever," Downes said. "If the scenario looks different by the end of the summer, we'll think of a strategy."
But a lot of companies won't look the same after the pandemic is over, said Lloyd. "The problem with all these unused tickets is that they are attached to a passenger," she said. "What if that traveler isn't in that organization anymore?"
Dallas said a process is required to account for people who may not travel after the pandemic is over. "It requires a secondary process to manage the amount that are outstanding and determine if we can use them longer-term with name changes and potentially use it for another traveler, or work with the carriers to determine if they can be potentially held for later use," she said.
Even if carriers are flexible about who can use the ticket, implementation will be a challenge, according to Lloyd. "Typically, that can't be done on an online environment. That means it's an offline transaction," she said. "If you have hundreds and hundreds of these tickets to get through, which most corporations will have at the end of this, that becomes difficult to manage in your normal travel ecosystem, particularly if it can't be done online. That has knock-on effects for cost, transaction fees, online booking tool adoption, all of that."
Of course, the vouchers are a double-edged sword for airlines as well. Airlines that are able to do more refunds than vouchers will "recover faster because they won't be burning off vouchers," Cowen analyst Helane Becker said in a research note. As such, buyers should expect different selling strategies from airlines.
"When you think of the revenue component for airlines, will they be pushing upsells harder to make up revenue costs?" Ulph said. "They've issued vouchers now to ensure liquidity, so we'll have to see what they will do then."