<B>Carriers Going Direct</B>
<I>British Airways Links Global Buyer To Internal Reservations System</I>
By David Jonas
As part of a large Internet strategy and its renewed commitment to the corporate market, British Airways is linking clients directly to its internal reservations system. The first such extranet booking connection is up and running at Republic National Bank--now part of the newly merged HSBC Bank USA. Meanwhile, Southwest Airlines last week said corporate tracking of purchases made on its site is imminent, giving managed corporate travelers a viable option for finding and purchasing low fares.
These developments underscore airline efforts to outperform one another by keeping pace with the power of the Internet and offering corporations an array of e-commerce options. Such projects, which target lower distribution costs and access to the largest number of Internet-savvy travelers, will become more prevalent in the corporate market as carriers continually seek out a competitive advantage.
While British Airways last week announced more than $160 million worth of Internet initiatives for consumers and the formation of a separate e-commerce division, virtual links--such as the one established with Republic--remain a high priority as the carrier continues to focus on premium traffic.
"Essentially, it's a direct link over the Internet and straight into our reservations system," said Noel Gilmartin, BA's e-commerce manager. "In a way, it's a reservations emulation system that allows them to centralize transactions in their New York office."
Travel requests from the company's U.K.-based travelers now are submitted to the New York office CTD through an internal Lotus Notes-based system. Once the request is received and a reservation is made directly with BA via password-protected access on a standard Web browser, an e-ticket is generated and the traveler receives e-mail confirmation.
Andy Menkes, then travel manager of Republic National Bank and now vice president of corporate travel for the merged company, said he approached BA last summer with the concept. "E-ticketing on BA at the time we started this did not exist through the GDS," he said. "We had been issuing e-tickets to travelers in the London office but not on BA, so I asked them for a direct link."
Menkes said the main benefits, aside from mutual cost savings, are guarantees of the correct fare and policy compliance in the U.K. office. In addition, a good deal of automation furnished by the airline, including limited character input, has increased travel agent efficiency.
"He will realize some cost advantages through centralization and an economy of scale while providing transparent service to his travelers," Gilmartin said. "In terms of travel management, by being virtual, he's able to go global."
Aside from the transparent booking process, travelers also can take advantage of self-service checkin functionality at either New York JFK or London Heathrow by swiping an Executive Club card.
The direct link with Republic was tested in October before going live about a month later. "We had to make sure we could originate a travel request through Andy's Lotus-based system and that he could access our booking system with a normal Web browser," Gilmartin said. "We may decide to go through this customization with each corporation we work with in this manner."
Indeed, BA is talking to several other corporations, both in the United States and Europe, and using the Republic system as a model.
While corporations are drawn to direct links for potential cost savings and easier processes for travelers, the airlines also have much to gain. Aside from distribution savings associated with moving transactions online, Gilmartin said there also is a competitive edge. "There are many different ways to work directly with corporations, but the trick is finding the right one for each client."
Gilmartin also said the program has "cemented the client relationship," and that BA picked up additional market share from Republic on the North Atlantic. Menkes confirmed that the carrier has gained incremental business now that the company's travelers can use e-tickets.
Moving forward, other areas of HSBC Bank USA, apart from pre-existing Republic National Bank employees, will not be folded into the system in the short term as the merged corporation works on other areas of travel management integration. Menkes added that the direct extranet booking connection "would also have application with other preferred partners," though he has not yet initiated those discussions.
Meanwhile, BA has expanded its informational extranet program to include more than 90 implementations in U.K. companies and a handful in the United States, most with annual air spends on BA close to $1 million. Anne Deamer, BA's e-commerce sales manager, said, "These extranet links are one of the most tailorable vehicles we have at BA. The corporate chooses exactly what they want on the extranet site." Content can include Executive Club information, online enrollment, customer relations, monthly business bulletins, generic and specifically tailored promotions, timetables for BA and its partners, a FAQ page and listings of products and services tailored to that corporation.
Deamer said that future enhancements will include online checkin, corporate revenue tracking and real-time arrivals and departure information. She added that many also have asked for the direct-booking functionality.
BA hopes its overall Internet strategy will increase the percentage of tickets sold through e-commerce channels from its current level of 2 percent to more than 50 percent in three years, and to boost revenues from £45 million (US$71.3 million) to £700 million (US$1.1 billion). A cornerstone of that growth plan is a new multi-airline Internet portal, similar to the one now under development by Continental, Delta, Northwest and United. Air France, KLM, Lufthansa and Swissair are on the list of likely participants.
Meanwhile, for U.S. airlines, like many other industries, e-commerce channels have become all the rage, and in fact, a top priority. While Delta last month took a huge step forward with the introduction of corporate booking functionality through its primary Web site (<I>BTN</I>, Feb. 21), Southwest--which does not seek out volume-for-discount programs--has taken a different approach.
The carrier already garners a higher percentage of revenues--roughly 27 percent--and twice the number of direct bookings through its online purchasing channels compared with its nearest U.S. competitor, and expects Internet revenues to top the $1 billion mark in 2000. Now, Southwest is working toward a new tracking solution for corporate travel managers.
"We are building that feature because our customers have asked for it and there is a concern in the corporate community about tracking," said Kevin Krone, Southwest's senior director of marketing automation. "We are working now with travel managers on the functionality and it should be available very soon," though no exact timetable has been announced.
The new feature is welcome news for many travel managers troubled by the fact that Southwest's offerings are not included in any corporate booking system backed by a GDS other than Sabre (<I>BTN</I>, Nov. 15, 1999). Also, the tracking abilities on the site will be very flexible, enabling travel managers to either monitor usage and purchase volumes in real time or request regularly updated reports.
One Southwest client said "the new endeavor is a very positive step in helping corporate travel managers quantify air spend," even if Southwest continues to avoid corporate discount programs. "For those corporations on a management/transaction-fee basis with their travel agencies, whereby all air commissions are returned to the company, the tracking will act as a verification process," he added.
Because Southwest does not offer negotiated discount programs, the online tracking feature is of particular relevance as business travelers can find low fares regardless of the channel used. Therefore, similar to the new E-Delta initiatives, some travel managers may opt to let their travelers loose in finding lower fares without risking data loss. And research suggests that business travelers flock to Southwest.com. A survey by Forrester Research of 2,000 business travelers who have purchased airline tickets online found that 30 percent have booked a flight on Southwest's site despite the carrier's 6 percent market share of available seats among the 10 majors.
Of course, encouraging business travelers--who purchase about half of all Southwest's tickets--to book online has a positive impact on Southwest's distribution costs. In fact, Gary Kelly, the carrier's vice president of finance and CFO, said, "Looking at direct costs only, we think we can produce a booking on the Web for well under a $1 and over the long run, it will be less than 50 cents." This compares very favorably to the distribution cost per ticket through the traditional travel agency channel of "much closer to $10."
Furthermore, Kelly said, "Investment in the Internet to date has been no more than $5 million, a very small component of overall operating costs." Obviously, the result has been an extremely profitable Internet experience for the low-fare carrier.
With the exception of a small presence on Travelocity, Southwest has opted to avoid other Internet partners. However, the carrier indicated that some of its frequent flyer program partners may begin offering services through Southwest.com. Meanwhile, to further entice business travelers, Southwest has extended its double frequent flyer points promotion for Internet bookings through the end of the year.
Moving forward, Southwest will hire another 30 employees to further develop its e-commerce initiatives and said the Internet will enable a streamlined airport process for the traveler, including ticketless airport operations within two years. The carrier already has reached a network-wide e-ticketing penetration of 80 percent.
In other airline e-commerce news, United Airlines and Buy.com launched a new co-branded site, Buytravel.com. The companies said the site currently is the only place on the Internet, aside from United's own site, where travelers can access the carrier's special discounted e-fares.
Also, Las Vegas-based National Airlines activated a new travel agency site linked to its homepage, www.nationalairlines.com. The site enables travel agents to access relevant information about the carrier, including commission policies. Future enhancements include a new direct booking engine.