Buyers: Changes In The Air

BTN recently discussed the current state of airline negotiating with, from left to right, Bill Patient, buyer of travel services at Atofina Chemicals in Philadelphia (U.S. booked air volume of $14 million); Betty Moilanen, senior manager of international sourcing for travel at Denver-based J.D. Edwards ($20 million); Cathy Spivey, senior manager of travel and meetings services for The Home Depot in Atlanta ($22 million); and Beth Castleberry, director of shared travel services for Atlanta-based Dun & Bradstreet and related companies, including BTN parent VNU Business Media (roughly $35 million).



BTN: Have you seen the airlines behaving differently in terms of negotiating and maintaining relationships as business traffic and revenues continue to deteriorate?

Cathy Spivey: I am seeing some flexibility. They are coming to the plate a little more and being more aggressive with their offerings and ability to compete with other options that have been provided to us.

Bill Patient: In recent history, I have seen carriers that do not normally chase our business become aggressive in the market and go to contract. I don't know if I see it as aggressiveness or softening of the requirements to qualify, but I think they are actually getting more aggressive on making sure you meet the objectives. That does not have as much to do with the economy as it does a strong reaction to how much travel managers got away with earlier in the past decade.

Beth Castleberry: I have seen more fixed fares. One airline was not even willing to consider them when I had asked before, but, to me, it's the way to go. It just makes it so easy.

Betty Moilanen: I agree. When you look at last year, with the fuel issue and the lack of control we had over price, this year's economic issues and quarterly losses are beyond what they were expecting, so it's parallel. The better you can lock in net airfares and fixed fares, the safer we will be from a budgeting standpoint.

Spivey: For the carriers, this is the one thing I am trying to convince them of. When we commit to a fixed fare, we will be able to deliver the share they are looking for. It is more of a win-win.

BTN: On fixed airfares, there is a certain amount of risk for you as well. You are gambling, hoping fares don't go down, right?

Patient: My last adventure with fixed fares was exactly that. A new entrant came into the market and the fixed fare was $200 higher than the standard fare. It was a matter of going back to the carrier, giving the 30-day heads-up, and telling them that we needed to renegotiate. Otherwise, they wouldn't see any business on it and they should go ahead and cancel it.

BTN: Speaking of making changes, have any of you noticed willingness on the part of the airlines to adjust threshold levels, more now than before?

Moilanen: We had a travel manager forum in Denver to talk through that because the feeling was that our volumes are lower as well. The airlines are struggling, but so are we. For a lot of the companies in Denver, they hadn't met performance goals as it was, and now that volumes were even lower, there was concern about going back to renegotiate. They would be in less of a position with less to bring to the table.

BTN: Since you all are in hub markets, have you seen a higher level of aggressiveness and more tailored programs from the lower-tier carrier, whether it be Frontier or AirTran?

Moilanen: I definitely have. On both sides, with the hub carrier and the other carriers, the discussions have been easier. My negotiations with the hub carrier have always been, "Here is your proposal," with very little back and forth. But this year was different, and it was really fun. On the other side, with the low-cost carriers, they were more aggressive and more willing to bend the rules a little. I felt like I won something in the negotiations this year, and I don't always come away feeling that way.

Patient: In Philadelphia, low-cost carriers don't have any kind of strength in terms of my travel patterns to come in and propose. It is a lack of frequency and, really, a lack of carriers. There just aren't that many operating out of Philadelphia. They may be able to reach another hub where you can connect through, but when you are arguing against a hub carrier that has nonstop frequency to those markets, it is a hard sell to travelers for them to save $200 and connect two times on their way to Houston.

Castleberry: Time is money and none of us want to connect either. Every time you get on and off an airplane, you open the chance for delay. We try to stay away from that in the travel policy, but we do try to stress the savings if one opts to do that, especially transcon.

Spivey: We have just incorporated requiring our travelers to use connections if it saves the company $400 or more over a nonstop and it doesn't inconvenience the traveler by two hours or more. It went into effect Aug. 1, so we'll see how it works; we never really forced something like this before.

Moilanen: We have the 90-minute rule. If it extends your time by more than 90 minutes, you do not have to take it.

BTN: Have you seen other elements of creativity from the carriers in terms of booking, contracting and developing relationships?

Spivey: We have talked about online auctions and buying certain city pairs. It is not unrealistic to think that in the future we'll have a certain deal depending on the market. We have talked with a couple of the carriers about just looking at the commitment of certain city pairs—almost 100 percent—to them. Initially, they had a deer-in-the-headlights look. But my last conversation with one of our major carriers was much more open and at least we talked about how we may be able to proceed. That would allow them to drive their costs down if it means using their Web site. Many of our travelers are getting used to the fact of going online and doing it themselves.

Patient: I can see huge antitrust implications for online auctions for airfares, similar to the GDS price-fixing issue. They may be able to get around if anonymity can be guaranteed, but for annual contracting I don't think I'd even want to approach that. I see Net auctioning for travel being more meetings related. If you find out that at the end of November you will have 100 people flying from point A to point B, you can structure that as a bid, throw it on a site and ask the carriers what they can do.

BTN: There is a lot of talk out there, and has been for years, about the possibilities of channel pricing. Why have the carriers not been able to get that ball rolling in the corporate market?

Patient: I think different carriers have seen the light in different ways. The infrastructure development to all that stuff is significant. They have each taken their own path. UAL got into agreements with GetThere (then ITN), Delta built their own, Southwest built their own, Continental built their own along with the Oracle relationship. Each one of those channels has a different vision. You have to see where that vision comes together, but we haven't seen that yet. When it happens, when Delta.com can share data with your system and with Continental, you can get a super PNR built with all these things. Then you can say, "Okay, I am going to buy directly from you, let me flip the switch." Then you will see channel pricing. But, until then, you will have some that are GDS, some that are online, etc. Expecting the traveler to understand that is going a little too far. The travelers want it simply, and rightly so. It is our job to make it simple.

BTN: Do any of you have policies regarding Internet bookings if, for example, they represent significant savings?

Moilanen: Our policy says that all reservations must be booked through the agency. However, we do know, for example, that booking Southwest direct is less expensive than us doing it for them. So, we have authorized Southwest. When there are other circumstances, we have asked that they bring it to us so we can verify that we couldn't get it. And then we would let them do it.

Patient: We say, "If you show me, you can." A lot of it has to do with making sure that they understand there are not only airline fees involved, but also Web site fees on certain sites. Especially now with Orbitz, it is hard to compare apples to apples what they requested and what they are looking at. They may get a lower fare, but I use that as an opportunity to sit down with this person so they understand the flexibility they are seeing on the Web site could be found at the agency if they rephrase the way they think. Many times we show them that we can get the exact same thing. On a fare-by-fare basis, in the tests that I run, we are still way up in the high 90s in terms of capability in getting the same fares. A lot of times we are still getting better fares than what is offered.

Spivey: We do not allow travelers to use any other Web sites other than the ones that are approved by the company, which are Southwest's SWABIZ and our online booking tool. It is for the same reasons that you guys expressed: There is no support and I don't want to send a message to the carriers until they work with us on some type of program to allow our travelers to use their Web sites.

Castleberry: The point is the flexibility. That is the key message that you have to get across to travelers. If you do the same thing with an agent, with the same open mind that you have when you go to a Web site and ask for Atlanta-Newark at any point in the day, for example, it opens a lot of possibilities. It is a tough act for us to manage the travelers.

Moilanen: Back to that flexibility issue, when the airlines bring to you what you have done with them so far—based on what they have tracked through the code or whatever—it never agrees with what your numbers show. I brought the Internet numbers that I took from the card and I brought the PassPlus program because the carriers also do not typically count that, and they showed flexibility and said they would work from that total volume instead of the total volume they had come with. And that same carrier, three or four years ago, would never go by anything but their own numbers. I said that I am giving more business than they are showing and I can prove it.

BTN: What would you like the airlines to do to accommodate all that volume?

Moilanen: I want my tour code to be used in all those channels. If someone is going to the Internet, I want the discount available to them. I don't want to have to prove what I gave them and that I lost discounts in some places.

Spivey: They need to also give us a program that we can manage. Right now, we can't manage a Delta.com and a TripManager and all these other forms of distribution until the carrier works with us on a program that will allow those options to our travelers.

Castleberry: I just want them to look at corporate card data.

Spivey: I absolutely agree. They have been paid. It doesn't matter to me whether it has been flown or not. About 80 percent of our fares are nonrefundable. That is the most frustrating part about the relationships we have with our carriers. We pay them but are not getting the same back.

Patient: I really only have that issue with one of my principal carriers. Everybody else seems to understand that the data is not going to match all the way through and that I have a pretty good handle on what we spent, whether or not they actually saw the passengers on the plane.

Castleberry: We have just put in TRX's EnCoRRe. It is going to do a lot for us in terms of auditing PNRs. Some large companies that have used it have really seen a reduction in agent keystrokes. We just turned on the auto-ticketing feature.

Spivey: We are trying out a Robotix program with Worldspan that we hope will achieve the same goals that EnCoRRe has achieved for you. We are anxious to see if it will improve productivity, quality and insurance and also do some auto-ticketing if the record is clean.

BTN: Meanwhile, there has been this problem of inconsistent negotiating strategies on the part of the carriers. Can you tell us about the difficulty as you see it?

Castleberry: It became very apparent to us when we changed reps and went from one region to another for whatever reason—mergers, spinoffs, etc. We have had a little bit of purview into existing agreements with companies that came into our program and it is very different. That New York market is almost a giveaway in a lot of respects, if you are dealing with a New York rep. And it is not just one airline. I have had discussions with the carriers, telling them that people think they are getting the very best deal but later find out that it is not the case. There are big gaps and I think there should be more consistency.

BTN: Some have suggested that advances in Webconferencing, along with all the surcharges slapped on, could mean corporate travel will not bounce back as quickly or completely as it has in past downturns. What would be the ramifications on your airline suppliers?

Moilanen: People are resistant to change, but, in time, if they make the change and realize that it wasn't so bad, they are not going to go back to old habits if it works for them.

Castleberry: We think it is going to be an opportunity for corporations to become a little more creative about doing things. It is opening a window that the airlines are going to regret was opened. Costs are so high and people are so desperate, but it is also the hassle involved in travel.

Patient: I don't know if I would even blame that on the economy. When the economy starts to cheer up again, the financial sector will go nuts again, they'll start flying first class again and it'll rebound somewhat from that perspective. But going forward, as technology gets simpler and as the workforce gets adjusted to it, the airline industry definitely won't see long-term growth prospects, such as they had through the '90s. But when it costs $25 to put a little camera on top of your monitor and you can go wherever it is you need to go without leaving your desk, people won't make as many trips because it's just no fun. The airlines will have to realize that we are as inelastic of a demand as vacation travelers.

Spivey: I think this is one of the most pivotal times that I will experience as a travel manager. We have had more focus within our organization on travel, and not just senior management but also our store associates and on up. It has really given my group an opportunity to show the value of the program or do something about it if it is not performing the way it needs to. With everything going on, it's the best of the worst times for us, and I am hoping the carriers, too, will see that we are their bread and butter.