<B> CO-NW Deal Jointly</B>
<I>Thomson First To Implement Global Pact</I>
By David Jonas
Indianapolis - Nearly two years after Continental and Northwest announced their alliance, corporate buyers finally are realizing the potential of signing a single contract for all corporate travel on the nation's fourth and sixth largest carriers. Anticipated for months, joint discount programs have arrived.
While a few other deals have been inked and several more are still in the cycle, Thomson Consumer Electronics was first out of the gate when travel manager Cindy Heston finalized a joint global deal last month. Equal discounting for all flights on either carrier kicked in on Sept. 1.
"There is one fare-basis code for the contract that includes both Continental and Northwest. Everything is endorseable by either airline," said Heston, adding that the single agreement is the seamless document she envisioned in January 1998 when Continental and Northwest first announced their partnership. Though the partners at that time were not ready to move forward on integrated deals, Heston, who already had a relationship with Northwest, opted to sign a separate deal with Continental.
By last June, the airlines were ready to discuss Heston's joint proposal. "We decided that we would look at the Northwest contract as a template," Heston said. "It will save us money not only on the discounting, but also on the administrative side. We only need to issue one ticket per roundtrip and pay the agency for a single transaction."
Kenneth Pomerantz, Northwest's director of sales development and analysis, agreed that existing agreements with Thomson provided a foundation for the new contract. "We kept many of the old features of the previous deals and added a few new elements," he said.
The deal excludes outbound Europe flights where Heston did not want to sacrifice an existing CO agreement, but includes flights on all codeshare partners.
While the discount levels are identical in almost every market, Mark Bergsrud, Continental's vice president of market planning and revenue programs, said joint contracts could have differing discounts on particular routes. He noted, for example, that the airlines and the buyers would specify routing through one hub over another based on demand. While a rarity, such instances likely would be on international routes.
Many travel managers agree that the networks of the two carriers complement each other very well, with little overlap. For Thomson in particular, CO and NW together offer more opportunities than any one carrier out of Indianapolis. Combined 1998 marketshare totals were more than 19 percent, a few points above US Airways. "The Thomson contract makes Continental and Northwest together the clear number-one supplier by giving a better across-the-board discount value," Bergsrud said.
As many travel managers report friction between partner airlines when attempting to formulate joint deals--due in part to differing cultures and existing competitiveness--Heston praised the reps she worked with. "Even though it was the first time they worked together, they were not worried about dominance and which is the more preferred carrier," she said. "They did what was necessary to make it work while being clear on what was up for discussion and what was not," referring to the intricacies of antitrust law.
"It actually went much smoother than we imagined," Bergsrud said. "There were some holdups, such as contractual language and legal reviews, which need not be repeated in future negotiations, but I am pleased with how quickly the deal was completed."
Heston said the icing on the cake is wide acceptance by Thomson's travelers. "With the frequent flyer points and the other perks that are included in the alliance, this deal is an extremely easy internal sell," she said, adding that the simplicity of a single roundtrip ticket regardless of which carrier travelers fly in either direction is all the more convenient for the company's travelers.
Continental and Northwest are in talks with other large accounts to establish similar joint deals, and Pomerantz said "less than five" already have been signed. Both carriers said that more interested corporations are contacting them each day, and a few travel agency sources verified that they are pursuing joint deals as an opportunity during account reviews and airline negotiations with some large volume clients.
Rolfe Shellenberger, senior consultant and Runzheimer International, said Continental is testing joint deals as one of several marketing initiatives. But "in the long run," he said, "I do not think that multiple carrier relationships will be successful in lowering buyer costs."
Other industry insiders said CO-NW joint deals can work only for a handful of corporations. Those that have a successful existing domestic deal with either, do not have heavy traffic in both carriers' networks or are based in one of the hubs might not see any benefit to negotiating jointly.
Lisa Trenda, travel manager at Minneapolis-based United Healthcare, said that while she has been approached by one of the carriers, she is hesitant to move into a joint program. "We already have separate programs that work with each of the two," she said. "And being based here in a hub could be a disadvantage.