Airline VPs Talk Alliance Deals

Northwest vice president of sales and customer relations Fay Beauchine, Continental vice president of sales and reservations Dave Hilfman and Delta senior vice president of sales and distribution Lee Macenczak recently discussed with BTN airline editor David Jonas prospects for joint alliance corporate contracting and progress in aligning products and services.

BTN: Please describe the current interest from corporations for alliancewide deals.

Lee Macenczak: There is significant interest and a little bit of curiosity. They are asking, "What is in it for me?" If a customer is willing to make a commitment, there is a powerful network that can come to bear here. It can provide a tremendous amount of benefit to a client, and certain people are already seeing that.

BTN: How are they already seeing the benefits?

Macenczak: Some people already know it will be a positive and want to go further down the road in the discussion in terms of getting involved in joint contracting.

Fay Beauchine: There is a base of people that already have had a successful alliance contracting experience either with Northwest and Continental, or Delta and SkyTeam or others. They are not afraid to come forward and ask us what we have.

BTN: How exactly is a joint contract more beneficial from the corporate standpoint than two or three independent deals?

Beauchine: It is single contracting and combined online alliance joint reporting. It is a great convenience for a travel manager.

BTN: When will that joint reporting be accessible for alliance clients?

Beauchine: It can happen this fall.

Dave Hilfman: Our goal is to start serious discussions on completion of our sales training. We are still working through a number of issues with the companies to ensure we provide the best, seamless product we can. We don't want this to be fluff. This needs to work. We all have a lot of experience on the alliance side of the business. As for the efficiency of a single contract, we are working on where the client would have one fare-basis code. It is not only great for the corporate customer, but also for the travel management companies administering a lot of this.

BTN: On the codeshare issue, our understanding is that a company whose only preferred airline of three is Delta, for example, does not receive their Delta discount on flights operated by Northwest or Continental that carry the Delta code. Is that accurate?

Beauchine: That is accurate if, in that case, they do not have a joint agreement. It is entirely up to the customer to invite us in so we can explain how this works. It will be up to the corporation to decide to either contract jointly, maintain what they have or bid another way.

Hilfman: In some cases, we could include codeshare discounts. It really varies by company. With Continental and Delta, there are opportunities where it would be a single contract but, working with our alliance partner, you can take the discount on codeshare. Maybe one carrier authorizes a discount on some of their codeshare partners or not. It varies.

Macenczak: That is where we have a little bit of flexibility. That is where our internal groups will get together and decide just how much we will allow something to be discounted beyond a joint agreement.

BTN: Within the context of a joint program, assuming a client asks for a proposal, how will you explain the value proposition?

Beauchine: The beauty is that there may be markets where we each are 3, 4, 5 or 6 percent players but together we have 20 percent share.

Hilfman: That is where the benefit comes in for the corporate travel managers. They can deal with an alliance that provides significantly increased scope, the ease of managing the program, competitive discounts, maximum flexibility and joint reporting.

Macenczak: And there will be one set of goals in this alliance. There will be no individual, specific carrier goals within these joint agreements. That was a restriction put on us by the U.S. Department of Transportation. They have to be overall market goals.

BTN: Will joint contracting initially be applicable only domestically?

Hilfman: You are likely to see us more focused initially on the domestic side, but clearly international is critically important to the overall success of these corporate programs. The economics do not work without having international routes fully integrated.

BTN: How do you prepare for the possible eventuality of Continental, Northwest and KLM joining SkyTeam, should KLM move in that direction?

Macenczak: That would be a hugely winning combination. For now, we will break it up into phases. We have to react to what the market wants. Domestic will take the very short-term focus and then we'll build into international as the customer drives us in that direction. The other situation will work itself out over time, one way or the other, and we will react in the marketplace accordingly.

BTN: Shifting gears, are you in any way working to combine meetings programs for corporate clients?

Hilfman: Yes. Certainly, Continental and Northwest do today. Our meeting, group and convention folks are having discussions with Delta, talking about similar programs.

Beauchine: The process works the same: If the customer requests a joint bid, we are prepared to discuss with them how to do that.

BTN: Would these be separate from transient programs or could meetings and transient programs be combined?

Beauchine: We have not gone that far yet in the planning. It is in the vision to do meetings, but we have not talked about combining with transient. If a customer asks for that type of program, we as an alliance will evaluate if and how we can do that.

BTN: A concern voiced by several travel managers is that three-way alliance contracts will be too complex.

Macenczak: We are not going to allow a complex agreement to hit the customer. That is why we are taking our time to do this right and getting our people prepared. When we get to the market, it will be in a form that people can understand and see the value based on their business.

BTN: You have alluded to sales training. Please explain how that will unfold.

Macenczak: We have gone forward with setting up training for all our salespeople so they truly understand exactly what is in place. This alliance is somewhat different than what we do with Air France, Alitalia, CSA Czech and Aeromexico and it also is somewhat different than the way Continental and Northwest work today. We have to be very clear with our salesfolks on exactly how we go to market with this and what they are and are not allowed to do. That training will start this month in three phases. It will be the collective training areas of Continental, Delta and Northwest coming together to train field sales representatives. We have to set a very clear tone and message on how we want this portrayed in the marketplace.

Hilfman: You have to look at the scope and scale of the alliance and what it can mean in terms of utility. Everyone needs to get updated on each other's route system. We also will cover the basics of the codeshare, understanding reciprocity of frequent flyer programs, elite level benefits, etc. The most important thing is the benefits to both corporations and travel agencies, including obviously corporate programs and agency incentive programs.

BTN: What other elements of the alliance are beginning to come together?

Beauchine: The customer drives the whole alliance and they will be able to approach us on our small business programs online and yet work in each independent program online. We are not combining programs, but the customer will be able to access us with one passcode and one sign-in. They will be able to earn and redeem and join all three programs or be in just one. That will be the same for both the small business programs and the travel agency Web sites. The consumer can choose.

Macenczak: We are just starting to scratch the surface on what we can do. As we move deeper into this—it is a 10-year marketing agreement—I think the benefits will only continue to grow. As we get out and listen to what customers want from us, we will go back and try to tailor programs to meet their needs.

Hilfman: As far as the small and midsize business program, there is such an enormous market in that arena. This three-way alliance is beneficial to a lot of smaller communities that might not otherwise have access to programs. The alliance allows us to expand the scope and introduce programs to companies that wouldn't get a chance to see them.

BTN: Please explain the network advantages for smaller communities.

Beauchine: We have a huge amount of coverage through this alliance. We have 10 hubs and an advantage for the consumer that our customers already are recognizing because they already are flying codeshare and already using the lounges. We also have 372 unique cities—each carrier only counting a city once—and we significantly outpace another large alliance.

BTN: How far along are you in aligning airport facilities?

Beauchine: All three partners in a protection situation, or slight interruption situation, have the ability to protect on each other. If Delta has a canceled flight, their agents can protect passengers on a Northwest or Continental flight because we have built access in our airports for them to do that. Also, Northwest and Continental already have reciprocity for Internet checkin for itineraries including both carriers. We will have that with Delta at the end of the year. Eventually, that will grow to the ability to check in on each other's Web site.

Macenczak: We have about 730 kiosks in the system. Eventually, they all will be enabled so that a passenger can use that to check in if they are flying Continental or Northwest on a Delta ticket and vice-versa. Hopefully that will be done later in the year. We also will co-locate where possible. In other cases, we can't do that.

Hilfman: Airport co-location is an important issue, especially in hub airports. As we have evolved our alliance partnership with Northwest, we have wherever possible tried to co-locate. It often involves leases, which are pretty complicated, and construction at various airports, but we have made significant progress. With Delta, we have had some very positive discussions with corporate real estate groups and airport authorities. Specifically, in Houston, Delta and Northwest will be moving into Terminal C in a couple of years. Continental in October is relocating to Delta Terminal E in Dallas Fort Worth.

Beauchine: Delta will move to the Northwest World Gateway in Detroit in November. Continental is already there.