ARC Pilots Suit Up For Corporate Accreditation

<B> ARC Pilots Suit Up For Corporate Accreditation</B>

By Cheryl Rosen

<I>New York</I> - First in the freshman class of travel managers to file for Corporate Travel Department accreditation by the Airlines Reporting Corp., Republic National Bank global travel vice president Andy Menkes is not sure he will profit financially from the new arrangement. At least not this year.

Still, he is confident the bank cannot help but benefit from a closer relationship with ARC's airline owners--and a more direct link to his purchasing data.

That's why Republic National Bank is among the first 12 pilot testers of the new ARC program, set to begin by the end of this month (<I>BTN</I>, March 16). ARC last week mailed applications to interested companies and posted an application form on its Website, at www.airreport.com.

ARC spokesman Allan Mut&eacute;n declined to cite the exact number of applications received, though he did say it was "more than 50 and less than 100," and included a cross-section of corporations ranging from very small to some "whose names certainly rang a bell." ARC is "pretty much ready to go" with the program, and expects to begin in the next two or three weeks, he said.

Menkes said he "has every reason to believe ARC has filled its quota" of a dozen corporations who have agreed to fill out the paperwork, post a bond and hire an onsite ARC-certified specialist to try the new classification, which for the first time allows corporate travel offices to produce and settle airline tickets without a travel agent intermediary.

For Republic National Bank, Menkes said, the issue of getting ARC plates is not about a lack of trust in travel agency commission accounting procedures, or to turn the travel office into a profit center. Rather, it's about creating a more efficient process over which he has total control.

Still, he acknowledged that the possibility of financial gain hovers in the wings. In the short term, he will gain most on the float on commission payments for tickets RNB travelers buy. Where airline commissions usually come back to corporate buyers on a quarterly basis, having ARC plates of its own will give the bank a weekly commission cash flow--and one that is easily auditable, Menkes said.

But the longer term vision is the freedom that having its own plates offers in terms of deciding which parts of the travel process to manage in-house, and which to outsource--and the negotiating clout that being able to walk away from all agency contracts offers.

After the pilot test, if ARC approves the program, "I'll consider reviewing the services we need and putting them out to bid," Menkes said. "My goal is not to turn the travel office into a profit center. But what I do see, especially in an era of electronic ticketing, is a high degree of flexibility in ticket distribution and pricing."

Menkes said he early on approached Rosenbluth International, his prefered agency, about his plans to get the CTD classification, and found it "supportive, and understanding of what I am looking to do."

"When the commission cuts hit the market, our agency said, 'You can have the commissions and just pay us a fee,' " Menkes said. "Now this classification allows us to do just that."

It also allows more, though. "We are reviewing taking the operation in-house, since in the current environment we're charged with the salaries and benefits of the staff anyway," Menkes said. "We've looked at the pros and cons of insourcing, and are inclined to move forward with a small increase in head count in exchange for the benefits of having our own operation. At this point the agency is the intermediary--but why do we need an intermediary for every part of the process? Tickets can be electronic, staff can be hired and settlement can be handled through electronic reporting."

Even with its own classification, the bank will have pieces of the program to outsource, Menkes noted. But having its own accreditation will allow a wider choice of outsourcers. "As long as we're outsourcing, we can include people who are not agencies," he said. "I can get MIS from one agency, GDS from another and 24-hour service from a provider that's not an agency at all. If you add up the numbers, the worst-case scenario is that it will be slightly more expensive, but it will offer full control. In the best case, the combination of additional float and commissions, and the lower cost of unbundling, will offset the higher payroll costs of having our own reservationists," he said. "And if you're smart, you can get by with as few as one person on the payroll."

That's not precisely the plan Menkes has in mind for Republic National Bank, though. Instead, he is focused on keeping the four reservationists he has, but having them handle more bookings and more international tickets than ever. "In an age of electronic ticketing, I can do a higher percentage of tickets from this location. And in 1999, when the Euro becomes the standard currency for IATA, I could take on new business markets through this location."

ARC's Mut&eacute;n noted that the CTD classification is open to U.S. corporate travel offices of foreign-based corporations, though he noted that ARC ticket stock "cannot leave the U.S. borders."

Mut&eacute;n said reactions from many travel agencies have been positive, but that the two travel agency associations are split, ARTA supporting the program and ASTA opposing it. "Some travel agencies see this as a way to enhance their relationship with corporate customers," he said. "A new role might emerge here for them in staffing the CTD and servicing the pieces that corporations are ill-equipped to handle on their own."

While the CTD may not be the answer for all companies, Mut&eacute;n noted that in the end, "moving closer to the airlines puts you closer to negotiating for what you want."

Other corporate travel managers with whom BTN spoke are waiting, it appears, to see how the pilot group fares.

Among those buyers not yet ready to commit, Frederick Fischer, corporate travel services manager at John Hancock Mutual Life Insurance in Boston, said that while his "gut feeling is that this might be a terrific option, we've decided to put it on the back burner until we review our options in the fall." Having its own accreditation is "something we've always wanted. It's too bad it didn't happen 10 years ago." Since it did not, John Hancock has set up a successful rent-a-plate operation, and "now we like the fit we have with American Express. Do we want to change that and get into the travel agency business? I'm not sure," Fischer said.