<B> Amex London Bridge Falls</B>
By Jay Campbell
<I>New York</I> - Unable to distribute the Virgin Atlantic seats it bought in bulk from Continental Airlines last summer, American Express has renegotiated the arrangement for a more traditional discount-for-volume approach that includes more seats than the original deal.
Corporate clients of American Express who were taking advantage of the program will lose out, but Amex said there were not enough such customers to keep it going. In addition, difficulty in attaining prominent GDS placement and an apparent softening of the U.S.-London market has led the agency to get out of this particular bulk buying opportunity (<I>BTN,</I> June 15, 1998).
"We were using Amex's London Bridge and it was a good value," said Dun & Bradstreet director of travel services Beth Castleberry, using Amex's internal name for the program. "It worked out well and we'll miss it, but I can understand that it would be hard to administer."
Amex's main problem was that "the seats were already on sale by the time we were able to inform our clients--and we were competing with traveler loyalties to frequent flyer programs and with corporate agreements on other airlines," said spokesperson Melissa Abernathy. "The listing in the CRS was also trickier than we had foreseen because you had to go deep into the screens to see it."
Commented one airline executive, "Welcome to the airline business."
Although the experience turned out to be more of a lesson than a money maker for the nation's largest corporate agency, the renegotiation doesn't mean Amex is out of the bulk buying business altogether. "We are still going to evaluate a series of different kinds of bulk buys, whether they be shuttle, transatlantic or others, because we think they are a means for us to help deliver a lower ticket price to clients," said Jud Linville, senior vice president of corporate services. "What we now have with Continental allows us to continue to provide a deep discount and, in fact, more availability of seats. That was proving troublesome, particularly in business class."
Richard Eastman, president of The Eastman Group in Santa Ana, Calif., said the concept of bulk purchasing of airline seats is anything but dead. "The dynamic represented in this agreement is both valid and clearly of interest to the airlines. Some extension of this distribution model, used by virtually all other industries that distribute commodity products, will be an economic reality for airline seats within five years," he predicted.
Eastman added that Amex "apparently got ahead of itself and overbought what it thought would be a good deal that everybody would jump to. This appears to be poorly planned and poorly sold, or the fare limit foisted upon Amex by the airlines in question precluded aggressive marketing."
If the Amex program got a late start in marketing to clients, it also may have hit a roadblock as companies cut back on travel in the second half of 1998, something British Airways and other carriers suffered in terms of lost high-yield business.
That market softness has manifested itself in Continental's latest effort to sell the Virgin Upper Class seats. The capacity-controlled seats--in a promotional Z3E fare from Boston, Los Angeles, Miami, San Francisco and Washington Dulles to London Heathrow--are available at rates discounted between 55 and 73 percent for travel through April 30. Virgin flights originating in Newark and New York JFK, as well as Continental's own flights to London Gatwick, are excluded.
In addition, through April 18, Continental is offering triple OnePass miles on its Virgin seats from Los Angeles and San Francisco to London Heathrow, and double miles from Boston, Miami, New York JFK, Orlando or Washington Dulles to either London's Heathrow or Gatwick.