Corporate travel buyers are scrambling to avoid paying through the nose for the major carriers' new restrictions on nonrefundable tickets by attempting to renegotiate their air deals, altering booking policies, cutting travel, re-educating travelers and agents, and making more use of low-cost carriers.
Meanwhile, Navigant International, Rosenbluth International and WorldTravel BTI are enhancing existing ticket tracking products to notify travelers via e-mail when it's time to change or use nonrefundable tickets.
Most business travel buyers still are sorting out what their response will be.
"I don't know what we are going to do, but I know we are not going to start booking fully refundables fares," said Dan Raynard, vice president of corporate travel at Calabasas, Calif.-based home loan company Countrywide. "That would increase our air spend by 30 percent." Nonrefundables characterize about 73 percent of Countrywide's yearly spending of $12 million in U.S. booked air travel. "We're looking at renegotiating with our airline partners for more discounts on refundables, and if that doesn't occur we will look at moving some of our travel to low-fare carriers," Raynard said. "With all the growth in our industry, cutting back on travel is not a realistic option."
Buyers said that the carriers' moves to restrict nonrefundables have compelled them to re-educate travelers. Last week, Melinda Samp, supervisor of the business travel center for State Farm Insurance in Bloomington, Ill., sent out a companywide e-mail that spells out how the carriers' changes will affect its employees, who currently use nonrefundable tickets for more than 95 percent of their travel.
"You don't want to overburden travelers with too much information, but you have to educate them. They used to be able to make changes to their nonrefundable tickets any time. Now they must make those before the flight, as opposed to after the flight," Samp said. "The low-cost carriers we use, including AirTran Airways and Southwest, have not made any changes to their fare policies, and we will obviously drive more business to them."
As for airlines' plans to exclude nonrefundables from corporate discount agreements, Samp said, "The carriers will have to make addenda to our contracts for that, and we expect to hear from them in the next few months. Unfortunately, I hear they are not being very flexible on this, even with global accounts."
Other buyers also confirm that carriers are unwilling to negotiate contracts that compensate for the cost increase. Meanwhile, many companies are altering their policies, some of which discourage the use of nonrefundables for itineraries where changes are likely.
"We're doing analysis by business unit on how often travelers make changes to their nonrefundable itineraries, and we are going to advise them to be much more selective in their use of nonrefundables," said Jeanne Young, director of strategic sourcing for travel and aviation at Hartford, Conn.-based insurer Aetna. As of now, Aetna spends about $13 million annually on U.S. booked air travel and mandates the use of nonrefundable tickets, a policy that is about to change.
"We're no longer going to tell people to book nonrefundables for every trip," Young said. "At minimum, this is going to cost us $500,000 a year."
The airlines' changes in nonrefundable fare rules could send shockwaves throughout the entire travel process, said Mark Walton, principal at Consulting Strategies in Rolling Meadow, Ill. Consider the effect new restrictions may have on booking through online systems, he said. "If the user interface doesn't identify nonrefundables on the first screen, which in many cases it doesn't, this can be problematic as the traveler needs to go three steps into the process before finding out what is nonrefundable and what is not," Walton explained. "Confusion and wasted time," could discourage self-bookings.
Until the airlines settle on stable yield management schemes, buyers and travel management companies will react to the carriers' pricing changes with policies and tactics designed to limit their exposure to rising costs.
"We are not happy about the carriers' changes to nonrefundable fare rules," said Judy Bauer, who is director of global travel management for Peapack, N.J.-based Pharmacia. "The airlines should have a fare structure in place that gets them their profit and is okay for us. The system is so unbalanced right now that we have business travelers using nonrefundable leisure fares in order to get around paying high-priced corporate fares."
Mega travel agencies, wasting no time in responding to the airlines' new use it or lose it policies, in the past two weeks said they will have new tools to help companies retain the value of nonrefundable tickets ready for use in the next several weeks.
Although nonrefundables are targeted at leisure travelers, in the past few years they've become common currency in the world of business travel, where strained corporate coffers have boosted the popularity of the low, restricted fares. Many companies even have mandated their use, and their ubiquity is evidenced by the fact that travel agencies have come to market with tools dedicated to tracking and managing them.
Under the carriers' recent restrictions
(BTN, Sept. 9), passengers using nonrefundable tickets will lose the full value of those fares unless they fly as ticketed or standby, or contact the carrier beforehand and pay change fees ranging from $50 to $200. Some carriers also moved to bar nonrefundable segments from corporate discount agreements, throwing off the formula companies use to create volume thresholds in order to qualify for discounted fares. The six largest air carriers, which will implement the new policies next week, routinely charge up to four or five times as much for a fully refundable ticket as they do for nonrefundable tickets, which account for as much as 40 percent of all business travel, according to American Express.
In early November, Navigant will launch RescueFlyr, a component of its ReportFlyr suite designed to rescue the value of unused nonrefundable tickets. It sends e-mail notifications to travelers who have booked nonrefundable tickets between one and three days before departure, reminding them of their upcoming departures. If travelers need to make changes to a nonrefundable itinerary, they are instructed to notify Navigant via e-mail or phone that they will not be making the trip. Navigant then will automatically rebook the ticket for as far out as possible, with the client paying the $100 change fee. Then, the traveler's profile will be flagged to indicate the presence of an unused nonrefundable ticket that has been rebooked for some future date months away. The ticket is placed on hold, so the value of the unused nonrefundable then can be applied to the new itinerary, minus a second $100 change fee.
A US Airways spokesperson said Navigant's automatic rebookings would be kosher as long as a $100 fee was paid each time a booking change was made.
Rosenbluth International and WorldTravel BTI offerings will hit the market around the same time as Navigant's product and are similar, but those services do not come with the automatic rebooking feature.